Kotak Mahindra Bank’s share price has fallen 1.5% in early trade. The private lender reported broadly in-line earnings for the second quarter, albeit with relatively higher margin pressure. Key brokerages have given a thumbs up to the stock and raised the target price, with some seeing as much as 21% upside from current levels.
Here is a detailed analysis of the key investment rationale driving the upgrades for Kotak Mahindra Bank-
Motilal Oswal on Kotak Mahindra Bank: Rebound likely
Kotak Mahindra Bank’s slippages declined on a quarter-on-quarter basis, while PCR stood largely flat at 77%. NIMs were largely in line and are expected to witness a rebound amid deposits repricing and benefit from the CRR cut, said Motilal Oswal Financial Services in a research note. Unsecured book continued to decline but is expected to rebound as the lending environment improves, aiding both growth and the margin trajectory. Overall loan growth is guided at 1.5-2x nominal GDP, driven by strong momentum in retail and unsecured lending.
The brokerage house has raised the target price to Rs 2,500, implying an upside of 14% from the current market price. The broker maintained its ‘Buy’ rating on the stock.
Jefferies on Kotak Mahindra Bank: Scope for rerating
Jefferies also has a ‘Buy’ rating on the stock. They too have raised the target price to Rs 2,650 to Rs 2,550 per share. This implies nearly 21% upside for the Kotak Mahindra Bank share price. The brokerage house has, however, trimmed the earnings for FY26-FY28 by 2-3% due to tad lower fees and margin pressure. They expect Kotak to deliver higher loan growth (16% CAGR over FY25-FY28) than larger private banks. That said, Jefferies expects its return on equity to be lower at 13% in FY27, due partly to lower leverage. They see valuations at 17x 12-month forward adjusted P/E compared with 15x for ICICI Bank and 17x for HDFC Bank. As a result, they see limited scope to re-rate.
Kotak Mahindra Bank Q2 FY26
The private lender posted a 2.7% year-on-year fall in its standalone net profit to Rs 3,253 crore in Q2 FY26, compared to Rs 3,344 crore in the same quarter a year ago.
Its Net Interest Income (NII) rose by 4% YoY to Rs 7,311 crore in Q2 FY26 from Rs 7,020 crore in Q2 FY25. The bank’s Net Interest Margin (NIM) was 4.54% for Q2 FY26.
The bank’s Net Advances increased 16% YoY to Rs 462,688 crore as of Q2 FY26 from Rs 399,522 crore as of September 30, 2024.
Kotak Mahindra Bank’s GNPA was 1.4% in the second quarter of FY26, and NNPA was 0.32%, while GNPA was 1.49% and NNPA was 0.43% as of September 30, 2024.
Kotak Mahindra Bank stock performance
The share price of Kotak Mahindra Bank has fallen 1.7% in the last five trading sessions. The stock has given a return of 10% in the last one month and declined 1.5% in the past six months. The lender has risen 25% in the last one year.