Kotak which offers financial products across the board – credit, deposits, wealth management, broking, life insurance, general insurance, investment banking, asset management, auto loans. With such a vast array of products in its kitty, the opportunity to cross-sell across the group is large. For example, 50% volume for life and general insurance comes from Kotak’s own distribution network. In this note, Decoding Kotak, we have tried to dissect each of the main subsidiaries that we believe will continue to grow larger and will be instrumental in driving synergy benefits and cross-sell opportunities as well as improving profitability level at the group level. While 811 continues to be the bank’s strategy to acquire customers, our recent interaction with the bank makes us believe strategies at each of the subsidiaries too are at play in full-force. We also believe that each business has (a) certain trigger(s) that will unfold gradually over time. As a group, Kotak has enough management bandwidth and a highly qualified and skilled bench to execute its evolution and ride the Indian financialization wave. Based on our SoTP, KMBL trades at 3.7x its FY20E consolidated book value. Given the opportunity and KMBL’s quality and pedigree, we believe it will be a steady compounder.
the bank is currently trading at 3.7x FY20E consol. BV and our SoTP valuation implies a 4.5x P/BV. The bank is currently trading 4.6x its trailing book BV which is 13% higher than the average over the last 5 years. We are estimating a consolidated PAT CAGR of 23% over FY19/20E and BV CAGR of 14%. We maintain BUY (TP = INR 1,540)
Technical indicator shows target of 1325 with stop loss of 1240 in short term
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