Kotak Mahindra Bank Ltd took a beating, falling 3 per cent in Monday's trade as investors absorbed September quarter results and the appointment of a new Managing Director & CEO, outside of the core team. The incoming CEO has highly stellar global experience as the CEO of Barclays UK and the CEO of Citigroup Asia-Pacific, analysts noted. But it is not readily clear how this would be a major advantage for an India-focused bank, YES Securities said as it maintained its target price of the stock at Rs 2,050.
Nuvama Institutional Equities, on the other hand, noted that Kotak Mahindra Bank had been running largely by a core team headed by a promoter-CEO (Kotak) that has not changed since its inception. The new CEO, it said, brings with him rich experience in consumer and digital banking but the brokerage felt that it would take the new CEO about 18–24 months to implement his perspectives.
"So his appointment would likely be a near-term overhang on the stock," Nuvama said in a note.
Following the developments, the stock declined 2.65 per cent to hit a low of Rs 1,722.50 on BSE. With this, the stock is down 4 per cent year-to-date, thanks to concerns around the change in the top management and the exit of Uday Kotak. Nuvama said the downside on the counter is rather limited, given the recent sharp correction in the stock price. It, however, sees no visible upside triggers for the stock.
"We roll forward our valuation to September 2025 ABV, lowering our target multiple to 3 times. After adding subsidiary valuation of Rs 381 per share, we arrive at a target price (TP) of Rs2,182 (as against Rs2,371 earlier, valuing it at 3.1x FY25E ABV + subsidiary value per share). We maintain a ‘BUY’ rating on Kotak Mahindra Bank," said Nirmal Bang Institutional Equities.
Prabhudas Lilladher said Kotak Mahindra Bis a solid banking franchise with strong balance sheet, prudent credit practices and attractive RoA profile of 2.2-2.3 per cent (ICICI Bank 2 per cent).
"However, over last 2-3 years, earnings quality of ICICI Bank has been superior with likely core RoE at 17 per cent (KMB 14 per cent). We trim multiple to 3.3 times (3.5 times earlier) but roll forward to September 205 core ABV, maintaining SOTP based target at Rs 2,250," it said.
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