Motilal Oswal have valued Kotak Mahindra Bank (KMB) on SOTP basis to arrive at a price target of Rs1,363 – an upside of 26% from current levels. They initiate coverage on the stock with a Buy rating. On a consolidated basis, the stock trades at 15.5x FY10E earnings adjusted for value of life insurance.
According to the brokerage house, Kotak Mahindra Group is all set to emerge as a financial powerhouse in India. They expect KMB's consolidated profits excluding life insurance to grow at a CAGR of 51% over the next three years to Rs20b in FY10. Earnings from the lending business, and asset management would maintain strong traction over the next couple of years. The share of lending business in profits would increase from 40% in FY07 to 48% in FY10, while the share of broking and investment banking (K-Sec & KMCC) would decline from 56% in FY07 to 39% in FY10.
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