Edelweiss Says Kotak Mahindra Bank Is In A Sweet Spot, Sees 18% Upside
Edelweiss upgraded Kotak Mahindra bank’s stock rating to ‘Buy’ from ‘Hold’ and revised its price target to Rs 1,205.
Kotak Mahindra Bank’s digital push—the 811 initiative—has put the lender in a sweet spot, according to brokerage Edelweiss Securities.
The homegrown lender has seen massive traction in its liability franchise, it said. That’s likely to sustain with Kotak’s superior rate offerings and better flow through erstwhile ING Vysya Bank Ltd., the brokerage said in a note.
The research company also revised its target price on the bank to Rs 1,205 from Rs 1,056, implying a potential upside of 18.6 percent from yesterday’s close. It is the second-highest target price after Spark Capital’s Rs 1,233 bet, among the analysts tracked by Bloomberg.
The brokerage upgrade comes after its recent interaction with the bank’s management.
Kotak Mahindra Bank has put incredible efforts to lay a firm foundation—liability franchise, digitisation, capital position and limited stress hit—for a scalable and profitable model. Given improved visibility on transitioning to steady‐state returns profile in the near term, we upgrade it to ‘Buy’.Edelweiss Securities Research Report
Commenting on the merger of ING Vysya Bank with itself, Edelweiss said, “Although the merger was optically seemed to be inexpensive, it did entail challenges including HR‐related issues and stress recognition in ING’s book. However, merger pangs were lower than estimated on operating expense and asset quality fronts.”
The brokerage believes that the integration challenges are now over and expect cost synergies to play through.