Edelweiss Securities has maintained 'Hold' on Kotak Mahindra Bank with target price of Rs 1,382 as against current market price Rs 1,351 in its report.
Commenting on the investment rationale Edelweiss said, ''Kotak Mahindra Bank's (KMB) Q4FY15 PAT (consolidated, excluding life insurance), at Rs 8.4 billion (up 40% YoY), surpassed our estimate following better-than-expected profitability of banking business (improved revenue traction), auto financing and capital market related businesses. Loan growth continued to be strong (at 25%) with robust build up in corporate banking book (benefitting from market share gains).
This, along with NIMs expansion and improving core fee led to better revenue traction. Moreover, acquisition of ING Vysya Bank (VYSB) will provide the much needed leap in terms of scale, synergies in terms of presence and product repertoire, among others. Key monitorable will be successful integration of VYSB including intricacies regarding HR related and various synergy benefits. KMB's valuation at 4.1x FY17E P/BV factors in fair bit of upside. Maintain 'HOLD' with target price of Rs 1,382.
In the near to medium term, successful integration of VYSB will be key. Management expects synergy benefits to flow from product complementarities, location benefit and cross sell opportunity. While on existing banking business the stock is trading at 4.1x FY17E P/BV, after building in successful integration of the VYSB merger and likely synergy benefits, the merged entity trades at 3.3x FY17E P/BV, which factors in fair bit of synergy upsides.''
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