Kotak Mahindra Bank, RBL Bank, Supreme Industries, Mahindra Finance & More Q4 Results Review: HDFC Securities

HDFC Securities Institutional Equities

Kotak Mahindra Bank - Best-in-class franchise still needs to solve for deposits

Kotak Mahindra Bank Ltd. delivered a strong beat, led by healthy loan growth (+18% YoY), reflation in net interest margins (up 28 bps QoQ), and lower-than-expected credit costs (20 bps annualised). Loan growth ex of wholesale was broad-based across segments, with continued traction in unsecured retail (10% of loans) in line with Kotak Mahindra Bank’s efforts to improve its share of high-yield products.

Deposit mobilisation picked up, primarily from term deposits, while current account and savings account saw a 50 bps QoQ decline to 52.8%. While Kotak Mahindra Bank’s move to chase supernormal yields through a higher mix of unsecured has merit, we see limited legs to incremental NIM reflation, given the challenge around an elevated loan-to-deposit ratio

RBL Bank - Simultaneous balance sheet recalibration poses a tall ask

RBL Bank Ltd. reported its highest-ever quarterly profit after tax led by healthy loan growth (+17% YoY) and stronger margins (5%), partly offset by elevated opex. Loan growth witnessed strong traction in retail credit (~54% of loans), led by credit cards/micro finance institution and new segments (such as home loans, and tractors).

Management continues to focus on the mobilisation of granular deposits reflecting in sequential improvement in CASA (+6% QoQ), but we watch out for sustained execution, given the tight liquidity environment and aggressive pricing.

Supreme Industries - Robust volume; a healthy margin

Supreme Industries Ltd. reported a healthy performance in Q4 FY23, driven by a strong volume in pipes and industrial segments. Consolidated revenue/Ebitda for Q4 went up 2/23% YoY. Supreme Industries reported Rs 0.7 billion of inventory gains (3% of net sales) in Q4 FY23. Overall, volume registered a strong growth of 15/7% YoY/ QoQ, supported by lower resin prices and healthy demand (five-year CAGR: 7%). We expect the recent cool-off in resin prices (which is getting passed on) to boost demand.

Mahindra Finance - Early wins on FY25 roadmap; stay the course

Despite a soft pre-provision operating profit print, Mahindra and Mahindra Financial Services Ltd. delivered a beat, largely on the back of zero provisioning. Mahindra Finance continued its impressive asset quality turnaround with the stressed pool (gross stage-II plus gross stage-III) at 10.4% (Q1 FY22 peak: 34.8%), led by relentless collection and recovery efforts in the backdrop of improving economic activity.

Strong business momentum (up 27% YoY loan growth) was led by healthy growth in disbursals (up 50% YoY). Mahindra Finance stayed the course on its FY25 roadmap to raise customer (higher affluence) and product (small and medium enterprise, leasing, personal loan) diversification alongside focused efforts on high collection intensity, which continues to drive higher opex and NIM compression

Aditya Birla Sun Life AMC - Negative operating leverage

Aditya Birla Sun Life AMC Ltd. reported a washout quarter, with 14% sequentially lower core operating profits, driven by heightened yield compression, continued equity market share loss, and elevated marketing spends. While we are constructive on Aditya Birla Sun Life AMC’s strong and diversified distribution network, given rising competitive intensity, we believe yields will plummet faster than assets under management growth, posing a high risk to earnings from negative operating leverage.

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