Kotak Mahindra Bank Gets 'Buy' Upgrade, Target Price Hike From UBS — Key Factors

Kotak Mahindra Bank Ltd. received a stock rating upgrade to 'buy' from 'neutral' from the multinational investment firm UBS. The share price target has also been hiked.

Analysts upgraded the stock based on their long-term thesis of market-linked businesses growing faster than lending among financials in the Asia Pacific coverage. "We view it as the best play in all key financial service segments via its fully owned subsidiaries. The contribution to Kotak from non-lending businesses is higher than at other banks," said a UBS note.

They expect improving sector tailwinds and the RBI's liquidity support may ease deposit pressure, thereby supporting loan growth. Based on this, loan growth can come in at 17% CAGR over the medium term.

Net interest margin may decline in the near-term due to repo rate cuts, which could weigh on net interest income growth in the second and third quarter.

On asset quality, sectoral data on microfinance segment suggest an improving and stablising trend, leading to a gradual credit cost decline from Q1.

• Recommendation: Buy

• Target price: Rs 2,540 (previously Rs 2,300)

• Last closing: Rs 1,944.7

• Upside: 26%

• Valuation: 1.7 times September 2026 estimated price-to-book

The Kotak Mahindra Bank share price has risen 9.4% in the last 12 months and 8.9% on a year-to-date basis.

Out of the 44 analysts tracking the stock, 27 have a 'buy' rating on the stock, 12 recommend a 'hold' and five suggest a 'sell', according to Bloomberg data. The average of 12-month analysts' price target of Rs 2,325 implies a potential upside of 20%.

UBS now has the highest price target for Kotak Mahindra Bank.

Kotak Mahindra Bank stock has corrected by 14% from a peak in April and has underperformed the Nifty 50 and Bank Nifty by 11% and 13% in the past six months, respectively.