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With 140 times growth in net profit and 64,000% rally in share price during the past two decades, billionaire Uday Kotak-led Kotak Mahindra Bank has turned the fortunes of many investors.
Shares of the bank have climbed 641 times to an adjusted price of Rs 1,779.95 on May 7, 2021 from Rs 2.78 on May 9, 2001. In simple terms, the growth in share price indicates that an investment of Rs 10,000 in the private sector lender in May 2001 would have now become over Rs 64.14 lakh. Analysts now hold a mixed view on Kotak Mahindra Bank post March quarter results.
Q4 results
Kotak Mahindra Bank recently posted a 32.82% year-on-year (YoY) growth in net profit at Rs 1,682.37 crore for the quarter ended March 31. It had posted a profit of Rs 1,266.60 crore in the corresponding quarter last year. Net interest income of the lender grew 7.95% YoY to Rs 3,843 crore. Provision and contingencies of the lender spiked to Rs 1,682 crore, up 32.75%, against Rs 1,267 crore in the same period last year. No fresh Covid-related provisions were created by the bank during the quarter under review. However, the figure stood at Rs 1,279 crore for the financial year ended March 31, 2021.
Experts take
Brokerage Motilal Oswal Financial Services has a ‘Neutral’ view on Kotak Mahindra Bank (KMB) with a price target of Rs 1,900. “KMB reported a miss on our expectations as profit after tax stood at Rs 1680 affected by lower net interest income and higher provisions,” the brokerage said.
On the other hand, HDFC Securities said Kotak Mahindra Bank’s Q4FY21 was better than its expectations, largely on the back of high other income (31% YoY), partially offset by lower-than-expected net interest income growth (8% YoY).
“The bank build on its uptick in credit growth in the last quarter with 4.5% sequential loan growth. Asset quality remains robust with FY21 slippages at 2.4%, along with a low restructured pool and high provisioning buffer. However, current lofty valuations factor in the uptick in credit, cost of funds tailwinds, and normalising credit costs in FY22,” HDFC Securities said while maintaining a ‘Reduce’ rating on Kotak Mahindra Bank with a revised target price of Rs 1,747 (earlier Rs 1,707).
Emkay Global Financial Services has a ‘Hold’ call on Kotak Mahindra Bank with a price target of Rs 2,000 on the back of its superior return on assets, reasonable asset quality management and strong capital comfort.