The impressive Q4 results released by Kotak Mahindra Bank have sparked a surge in its share price, which climbed by 4.2% to ₹1,612.30 apiece on the BSE. This upswing was driven by the bank’s robust financial performance, which saw a YoY growth of 18.22% in standalone profit to ₹4,133.30 crore for the quarter ended March 2024.
Kotak Mahindra Bank’s net interest income (NII) also experienced a notable 13% YoY increase to ₹6,909 crore, while the net interest margin (NIM) in Q4FY24 rose to 5.28% from 5.22% in Q3FY24. These positive indicators have instilled confidence among investors and contributed to the significant gain in the bank’s share price.
JP Morgan, a leading brokerage firm, upgraded Kotak Mahindra Bank to an ‘Overweight’ rating, citing supportive valuations following recent RBI actions and senior management departures. The brokerage firm believes that the bank can continue to expand its balance sheet at a 16% CAGR over the next two years, even considering the normalization of ROA. JP Morgan anticipates that the bank’s earnings will compound at a rate of 16-17% CAGR over the next two years, with potential for further upside driven by improved operational efficiency. Consequently, JP Morgan has set a target price of ₹2,070 per share for Kotak Mahindra Bank.
On the other hand, Emkay Global Financial Services adopted a more cautious approach, retaining a ‘Reduce’ rating for Kotak Mahindra Bank. The brokerage firm acknowledged the bank’s sizable 28% beat on PAT, primarily driven by treasury gains, debt syndication fees, the reversal of AIF provisions, and a lower tax rate. However, Emkay Global revised its FY25E-27E growth estimates downward by 200 bps, projecting a decline in the RoA/RoE trajectory to 1.9% – 2.3% / 13% – 14%, attributed to higher opex and provisions. Consequently, the brokerage firm lowered its target price for Kotak Mahindra Bank shares to ₹1,625 apiece.
