Brokerage house JPMorgan upgraded Kotak Mahindra Bank Ltd.'s stock rating to Overweight from its earlier Neutral, anticipating a 25 percent loan growth going forward.
"Parent bank is strongly positioned and the subsidiaries are in a sweet spot," the broking firm said in a note. It hiked its price target on the stock to Rs 1,100 from Rs 875, implying a potential upside of 13 percent over Tuesday's closing price.
While NBFC subsidiaries are riding on new products and strong demand, its capital markets subsidiaries are benefiting from the parent's improved retail distribution and a favorable operating environment post demonetisation, according to JPMorgan.
For FY17-20, we see 31 percent EPS driven by 25 percent loan CAGR and return on assets rising by 46 basis points. The ROA uptick is driven by a 13 basis points drop in cost income and a 7 basis points drop in credit costs.JPMorgan
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