'Buy' Kotak Mahindra Bank Shares Maintains Motilal Oswal With 18% Upside — Check Target Price

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Motilal Oswal Report

Kotak Mahindra Bank Ltd. reported a sharp 32 bp QoQ contraction in net interest margin and elevated credit costs (93bp) in Q1 FY26. However, we expect operating performance to recover in the coming quarters as SA/TD repricing takes effect and credit costs subside with a reduction in unsecured segment slippages.

The bank is selectively rebuilding its credit card and PL portfolios, while retail, SME, and tractor portfolios continue to witness healthy growth, supporting a balanced mix. Current account and savings account remains healthy at ~41%, and sweep products are cushioning deposit cost pressures.

Subsidiaries are emerging as a core strength, contributing 26% to PAT in Q1, with the mix projected to increase to 30% by FY28, driven by growth in the AMC, Prime, and Insurance subsidiaries.

We have upgraded Kotak Mahindra Bank after being Neutral on the stock for almost five years in Jan’25 at Rs 1,759. While we estimate current year performance to remain modest we nevertheless estimate the bank to deliver 20% earnings cagr over FY26-28E. This in context to reasonable valuations will aid stock performance.

We thus estimate Kotak Mahindra Bank to deliver robust return ratios, with RoA/RoE at 2%/12.8% by FY27E. Retain Buy with target price of Rs 2,400 (2.4x FY27E adjusted book value, including an SoTP of Rs 764 for subs).

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