Kotak Mahindra Bank share price zooms nearly 10% on strong Q2 numbers; should you buy?

Kotak Mahindra Bank share price zoomed 9.75 per cent to Rs 1,553.90 apiece on BSE, a day after the bank reported a 26.7 per cent on-year growth in net profit to Rs 2,184.5 crore during the July-September quarter. The private sector lender had posted a net profit of Rs 1,724.48 crore in the corresponding quarter of the previous year. Net interest income (NII), the difference between interest earned and interest expended, increased 17 per cent on-year to Rs 3,913 crore, while other income increased 18.6 per cent on-year. Following strong Q2 earnings, most of the brokerages have ‘buy’ rating to the stock. On the back of steady revenues and a sharp decline in provisioning expenses, Motilal Oswal Financial Services upgraded its rating to ‘buy’ after a gap of 10 quarters. 

Kotak Mahindra Bank shares have rallied 55.3 per cent from March low of Rs 1,000.35 apiece. It will take Kotak Mahindra Bank to jump 17 per cent from the previous close to hit the target price of Rs 1,650 pegged by the brokerage firm. It said that the bank suggested an improving trend in asset quality and remains confident on the quantum of COVID-19 provisions made. The bank continues to report steady progress in building a strong liability franchise, with the CASA ratio improving further to 57 per cent.

Research and brokerage firm BOBCAPS has also recommended to buy Kotak Mahindra Bank following an above- expected quarter. It has given a price target of Rs 1,635, a potential upside of 15 per cent from Monday’s close. The brokerage firm likes Kotak Mahindra Bank stock for its proven and stable leadership, strong liability franchise, best-in-class margins and sound underwriting standards. “We raise our FY21-FY23 earnings estimates by 10-11% to factor in lower operating expenses and credit costs,” it said.

Similarly, YES Securities too has a ‘buy’ rating with an upside of nearly 18 per cent in the stock price. It has set a target price of Rs 1,670 apiece. Analysts at YES Securities said that Kotak Mahindra Bank has underperformed in recent months and its valuation premium to HDFC Bank has dissipated. “Expect valuation to re‐rate from current 3x FY22 P/ABV is response to likely continuation of non‐linear earnings growth,” they added.

Around 10 AM, Kotak Mahindra Bank shares were trading 8.19 per cent higher at Rs 1,531.65 apiece, as compared to a 0.31 per cent rise in S&P BSE Sensex.

(The stock recommendations in this story are by the respective research and brokerage firm. Financial Express Online does not bear any responsibility for their investment advice. Please consult your investment advisor before investing.)