Kotak Mahindra Bank Q4 Results Review - Robust Quarter; Undemanding Valuations: Dolat Capital

Dolat Capital Report

Kotak Mahindra Bank Ltd. reported a healthy quarter with net interest margin at 5.28% (+6 basis points QoQ), strong deposit growth at 10% QoQ (with 7% growth in <50 million deposits), and lower tax rate aiding return on asset of 3%. Excluding multiple one-offs this quarter (interest from IT refund, AIF provision write-back, higher syndication related fee, and lower tax rate), profit after tax would be higher by 8% versus our estimates and NIM would be stable QoQ.

Management expects RBI restrictions (on new credit cards issuance and customer acquisition through 811) to not have any material impact on its business, with Rs 3-4.5 billion of profit before tax impact on a full year basis (~2% of PBT). Kotak Mahindra Bank continues to aspire for unsecured mix at mid-teens (11.8% currently).

Given the near-term uncertainty over RBI action, we lower bank’s standalone multiple to 2.5 times and build in slightly high opex. Tweaking estimates, maintain ‘Buy’ rating with revised target price of Rs 2100 (from Rs 2230 earlier) valuing the standalone bank at 2.5 times FY26E adjusted book value (3.4 times including subs). Trading at 1.8 times standalone FY26E ABV, valuations are undemanding.

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