Kotak Mahindra Bank Share Price Target: 3 Reasons Why Should You Buy The Stock This Week

ne of the top integrated and diversified financial services conglomerates in India, Kotak Mahindra Bank (KMB) offers a broad range of solutions for different client and geographic sectors. By utilising its impressive liability profile, the bank has effectively established a strong banking franchise in India over time. KMB has 3,329 ATMs and 5,343 group branches across India, giving it a well-rounded presence. The brokerage firm Axis Securities has recommended to buy the shares of Kotak Mahindra Bank by rating the stock as a top pick of the week. Below are the 3 reasons why market watchers should buy the shares of Kotak Mahindra Bank.

Pursuing Growth - Both Organic and Inorganic: Faced with growth challenges in the credit card and personal loan segments due to the embargo, and in MFI due to asset quality stress, KMB's focus has shifted towards expanding secured businesses and corporate lending. The bank aims to drive higher cross-selling and deepen relationships to increase revenue penetration in the large corporate segment, where irrational pricing has been observed. KMB will continue to pursue organic growth; however, it remains open to inorganic expansion. We expect the bank to register a healthy credit growth of ~18% CAGR over FY24-27E.

Asset Quality to remain stable: In line with industry trends of stress visibility in the unsecured segments, particularly in MFI and credit cards, KMB's Q2FY25 slippages were largely from these segments. The bank has tightened its credit filters in these segments and expects the credit quality of new acquisitions to remain healthy. Additionally, recoveries from rural and secured businesses are likely to offset incremental stress from the unsecured portfolio. As a result, credit costs are expected to remain steady at 65-70bps before trending downwards.

Multiple NIM improvement levers identified: KMB's margins have been impacted primarily due to a shift in the portfolio mix following the embargo. Currently, ~60% of the bank's portfolio is EBLR-linked, and in the event of a rate cut, NIMs could contract sharply. However, KMB aims to protect NIMs by balancing several factors: (i) support from the downward repricing of deposits in a rate cut cycle, (ii) a higher proportion of CASA deposits, and (iii) the resumption of growth in better-yielding unsecured products. Collectively, these factors should support KMB's margins, which are expected to range between 4.8-4.9% over FY25-27E.

Kotak Mahindra Bank Share Price Target

"We expect KMB to deliver healthy Advances/NII/Earnings growth of 18/17/12% CAGR over FY24-27E. With RBI restrictions limiting growth in higher-yielding unsecured products, the bank has shifted focus towards secured and corporate lending. Despite asset quality challenges in the unsecured segments, improved performance in the secured segments in H2FY25 should help maintain asset quality. We recommend a BUY on the stock with a target price of Rs 1,916, implying an upside of 10% from the CMP," said the research analysts of Axis Securities in a note.

Disclaimer

The recommendations made above are by market analysts and are not advised by either the author, nor Greynium Information Technologies. The author, nor the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.