Kotak Mahindra, RBL Bank, SBI Life, Indian Hotels, ICICI Lombard, Metro Brands Q3 Review — HDFC Securities

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HDFC Securities Institutional Equities

Kotak Mahindra Bank - Commendable performance in a tough environment

Kotak Mahindra Bank Ltd.’s earnings were marginally above our estimates, with healthy growth on both sides of the balance sheet and stable margins, offset by elevated credit costs from the unsecured book. Loan growth came in at 15% YoY / 3.6% QoQ with healthy growth across secured businesses.

Margins remained stable at 4.9%, despite strong growth, supported by a full-quarter impact of 50bps rate cut in select SA buckets, and stronger traction in CA (+5% QoQ) and TD sweeps (+31% YoY).

The management continues to engage with the RBI on corrective measures taken post the regulatory embargo. With Kotak Mahindra Bank harbouring ambitions of becoming the third-largest private bank in the medium-term, we expect investments to remain elevated to augment balance sheet growth. We trim our FY25E/FY26E estimates by ~4%/2%, largely owing to elevated credit costs, even as Kotak Mahindra Bank remains buoyant on growth trajectory across segments; maintain Buy with revised SOTP-based target price of Rs 2,040 (standalone bank at 2.2x Sep-26 adjusted book value per share).

SBI Life Insurance - Changing mix; improving profitability

SBI Life Insurance Company Ltd.'s 9MFY25 print was in line with our estimates as VNB clocked in at Rs 42.9 billion (+6.2% YoY) and VNB margins softened to 26.9% (-120 bps YoY), on the back of a higher share of ULIP in the overall APE mix at 72% (9MFY24: 68%).

Basis management commentary, we cut our APE growth forecast to 12% YoY, driven by sustained growth in individual business, offset by a lumpy Q4 FY24 base of non-recurring group fund business. Our high conviction Buy continues to be anchored on three powerful and sustainable moats:

1. exclusive access to SBIN’s massive distribution network (branch penetration at ~2%);

2. scope for improvement in margin-accretive traditional mix; and

3. lowest cost (excluding renewal comm)/APE ratio among peers at 33.9% (9MFY24: 34.6%).

We expect SBI Life to deliver FY24-27E APE/VNB CAGR of 15%/15%; we maintain Buy with a target price of Rs 2,050 (2.3x Sep-26E EV).

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