Kotak Mahindra Bank (BUY): Beats estimates; justifies premium valuations - Ambit

Kotak Mahindra Bank's (KMB) 4QFY13 consolidated PAT at Rs6.7bn was 20% above our estimates and 18% above consensus estimates. The strong profit growth was primarily driven by strong PAT growth in its lending business. The positively surprising results reinforce KMB's relative immunity from the asset quality risk and its suitable positioning to benefit from a lower interest rate environment and improvement in capital markets.

Hence, we continue to prefer KMB in the banking sector, even though the stock is currently trading at premium valuations (~20.0x FY14 P/E and 3.0x FY14 P/B) and we do not expect a significant rerating of the stock in the near term. With the company delivering better-than-expected profitability, we need to revisit our earnings estimates and hence our target price.

Source : Equity Bulls

Keywords