Kotak Mahindra Bank share price targets: Buy, hold or sell KMB post Q3 results?

Kotak Mahindra Bank Ltd (KMB) reported mostly in line December quarter results, following which the analysts suggested either 'Hold' or 'Buy' on the stock. For the quarter, net advances for KMB grew 16 per cent YoY, in line with the bank’s stated strategy of growing at 1.5-2 times nominal GDP. Growth stood at 4 per cent sequentially, consistently over the last three quarters. Average deposits were up 15 per cent YoY, driven by granular CASA growth.

Nuvama noted that Kotak's profit after tax marginally missed the consensus estimate. NIM and slippage missed estimates, but credit cost was a beat, it said. Slippage fell 1.5 per cent sequentially against its estimate of an 8 per cent decline. 

For now, Nuvama retained its ‘Hold’ rating on the stock with a target price of Rs 416. It believes KMB can get re-rated if slippage declines and growth in unsecured accelerates. 

"Media reports of KMB being a likely bidder for IDBI Bank are an overhang for the stock. The CEO made it clear that even if an acquisition makes both strategic and financial sense and is reasonably valued, but could consume a lot of management bandwidth for integration, Kotak shall not opt for it," Nuvama said.

For MOFSL, KMB's results were in-line quarter, with NII and PAT largely meeting expectations. Operating expenses, it said, came in higher than anticipated, while provisions were lower than estimates. Slippages, it said declined marginally on a QoQ basis, and PCR remained broadly stable at 76 per cent. 

NIMs were flat QoQ, affected by a 4 bps drag from the deployment of excess liquidity into treasury instruments. 

The management expects NIMs to improve going forward, supported by ongoing deposit repricing. The decline in the unsecured portfolio has now been arrested, and the bank has reiterated its guidance for stronger growth in the coming quarters, which should also support margins. Overall loan growth is guided at 1.5-2.0 times of nominal GDP, which was driven by stable momentum in retail and unsecured segments. 

"Given the continued growth traction, we believe the bank is well positioned to deliver a healthy 16 per cent loan CAGR over FY26-28E. We maintain our earnings estimates and expect RoA/RoE of 2 per cent/12.5 per cent by FY27. Reiterate Buy with a target price of Rs 500," MOFSL said.

Nirmal Bang estimated an earnings CAGR of 6.2 epr cent over FY25-FY28, which results in RoA and RoE of 2.1 per cent and 12.3 per cent in FY28. 

"We have valued the standalone business at 2.5 times December 2027E ABV, which is at a discount of 32.4 per cent to its 5-year mean P/ABV of 3.7 times. Adding subsidiary value per share of Rs 122, we derive our target price of Rs 524 (Rs 510 earlier). We remain positive on KMB due to it’s higher than
industry loan growth and healthy RoAs of 2 per cent over FY25-FY28. We maintain a ‘Buy’ rating on Kotak Mahindra Bank," it said.