Vijay Kedia’s birthday celebrated with gusto by fans
Since the early hours of the morning, Vijay Kedia’s fans have been making a beeline to offer him birthday wishes. Some brought him virtual cakes and candles. Others thanked him for being an inspiration and a guiding force to them.
Almost all are appreciative of his humility and generosity.
No doubt, this is a sentiment to be cherished. Not all stock wizards are able to command the respect and affection that Vijay Kedia does.
— Finitelearner (@Finite0) November 4, 2017
— Sanjay Gupta (@Sanjubfsi) November 4, 2017
@VijayKedia1 Many happy returns of the day sir. You’re my idol. ? hope you have a multibagger year ahead ?⌚️
— bhargav kartik (@bhargav_kartik) November 4, 2017
Happy Bday sir…
Here's wishing u the best in this yr
Continue lighting up d screen with ur multibaggerss!!!
— Nigel D'Souza (@Nigel__DSouza) November 4, 2017
@VijayKedia1 Happy birthday to our inspirational hero. Keep smiling sir.
— Bharath Reddy (@BharathReddy38) November 4, 2017
@VijayKedia1 many many happy returns of the day… Happy birthday sir… May your wealth and health multiply manifold in this year…
— MANAN AMIN (@MANANAMIN123) November 4, 2017
Many many returns of the day sir.
You are my role model.
Wish you a great yr ahead.
— Parth patel (@PDPatelkani1995) November 4, 2017
@VijayKedia1 I feel like writing the whole letter for thanking you to encourage the new investors like us but for now Happy Birthday Guruji.
— Vasu Lalan (@vasulalan) November 4, 2017
To the most diligent, prudent and yet very Candid Investor of our country @VijayKedia1 , we wish you a very Happy Birthday!?
— Jignesh R Mehta (@jigneshrmehta) November 4, 2017
@VijayKedia1 Warm wishes on your Birthday. Successful, yet you come across as an extremely humble person. I greatly admire you! Good day
— Mayank Jain (@MaayankJain) November 4, 2017
@VijayKedia1 HBD Sir your Great thinking skills helpful to all because you don't only keep it to yourself but spread it unconditionally
— Vishal Karia (@vishal3576) November 4, 2017
@VijayKedia1 Sir ji Happy Birthday nd party Hard??nenu market lo invest cheydaniki meru one of the reason..guruji?
— Stairway2Heaven?? (@gtsrikanth) November 4, 2017
Vijay Kedia gracefully acknowledged all the greetings.
Thank you all for your good wishes and kind words.
God bless you. ?
— Vijay Kedia (@VijayKedia1) November 4, 2017
(Vijay Kedia with 9x Billionaire Radhakishan Damani)
Clarion call by Vijay Kedia: Small private banks should be bought aggressively because the worst is over for them
Amidst all the festivity, an important message sent by Vijay Kedia escaped the attention of his fans, namely that the time is ripe to aggressively buy small private banks because the worst is over for them.
In my biased opinion, the worst in small private bank is over.
— Vijay Kedia (@VijayKedia1) November 3, 2017
Vijay Kedia’s view shared by Nischal Maheshwari of Edelweiss Securities & Tushar Pradhan of HSBC Global AM
Vijay Kedia did not articulate the reasons for his view and so it is not known what change has happened which has made private banks so alluring.
However, Nischal Maheshwari of Edelweiss Securities provided a masterful explanation as to why NBFCs and private banks are an irresistible buy now.
“NBFC space and financial inclusion is going to be the big theme which has been running for years and it will continue for at least next three to five years,” he said with supreme confidence.
Forget PSU Banks
Nischal Maheshwari was somewhat contemptuous of PSU Bank stocks. He called their rally a “one-time pop up” and said that he still has a “cautious outlook” about them.
“There is going to be a couple of quarters of pain going ahead because they have to now start taking the write offs,” he added in a grim tone.
“We still favour the private sector banks and the NBFCs over PSU banks,” he said firmly.
Best NBFC stocks to buy: DHFL & CAPF
Nischal Maheshwari came out with all guns blazing in favour of Dewan Housing Finance and Capital First.
He pointed out that both stocks have a 30-35% kind of growth, improvement in ROEs and insatiable demand.
He emphasized that both stocks are “very reasonably priced” in relation to the other bank and NBFC stocks.
“Dewan Housing is around two times price to book with around 16% kind of ROE and Capital First is around 2.3 times with around 14% ROE going towards 16 by FY19. Both of them are reasonably priced, one can look at acquiring these two stocks,” he advised.
Great PSU Bank recapitalization will not wrest market share from NBFCs and private banks
Tushar Pradhan of HSBC Global AM offered soothing advice on an issue that has been troubling all investors, namely, that the PSU Banks will storm into the marketplace and grab market share from the NBFCs and Private Banks.
“The growth in the NBFC sector has not come at the cost of the banking sector. The market has expanded,” he said, implying that the market is large enough for all players.
“Just because the public sector banks have returned to some sort of health does not mean that someone who is being borrowing from the NBFCs now will go to a public sector bank,” he added.
Tushar Pradhan also made the important point that there is a culture difference in the way that PSU Banks and private banks operate.
A SME seeking a small ticket loan will find it inconvenient to go to a PSU Bank and wade through their bureaucratic procedures to be able to avail a loan.
A private bank or NBFC will be able to meet the needs of the SME swiftly as compared to a PSU Bank, he explained.
“There is considerable reason to believe that the expansion of credit in the economy will continue, more and more people will now be accessing the credit markets for various reasons,” he said, implying that the market size will be ever increasing and that the dominant players will prosper.
Vijay Kedia’s high-conviction private bank stock pick: Karnataka Bank
Karnataka Bank is Vijay Kedia’s high-conviction stock. As of 30th September 2017, he holds a treasure trove of 56,60,703 shares.
The investment is worth Rs. 95 crore at the CMP of Rs. 168.
The stock has done well with a 45% YoY return and a 61% return over 24 months.
He has recommended Karnataka Bank to us as part of his Diwali Dhamaka recommendations where he shared the stage with Porinju Veliyath (Porinju also recommended three stocks).
“Going forward, Karnataka Bank should show improvement in performance. I also expect improved asset quality and earnings for this bank in the coming years,” Vijay Kedia said, implying that we can buy the stock without any hesitation.
He has also written an elaborate article in Outlook Business in which he has described Karnataka Bank as his “best pick for 2017”.
Karnataka Bank has unveiled a vision 2020 plan under which it intends to double its loan book to Rs 80,000 crore by March 2020 from Rs 38,484 crore as of June end, 2017.
It goes without saying that if these ambitions are achieved, Vijay Kedia’s promise that Karnataka Bank will be a multibagger will be effortlessly fulfilled.
Karnataka Bank has shown ‘solid performance’ and has target price of Rs. 200: Centrum
The wizards at Centrum have conducted an in-depth study of Karnataka Bank and recommended a buy on the basis that it has shown “solid performance”.
The logic is as follows:
“Solid performance; reiterate BUY
We retain Buy on Karnataka Bank (KBL) with TP unchanged at Rs200 (valued at 1.3x FY19E ABV). Q2’18 results were strong on all fronts – loan growth accelerates, margins improve, fee income strengths further and asset quality – ie slippages moderate. Commentaries on each of the above key parameters remain encouraging and thus even as we factor in elevated provisioning; we believe RoE’s are set to inch towards 12% levels by end-FY19E. Capital position remains strong; valuations at 1x FY19E ABV remain undemanding.
– Q2FY18 result – Solid performance: Q2’18 NII at Rs4.4bn grew 10.8% YoY and was led by 12.3% YoY growth in loans and further expansion in NIM (calc) to 2.75% (+9bps QoQ 3bps YoY). Non-interest income too came in higher (fees grew 36% YoY; treasury were up 21% YoY) and with stable costs saw operating profit grow 57% YoY. Slippages stood at Rs3.74bn (3.6% of loans annualised) vs. Rs4.98bn QoQ and after providing for the same including tax related provisioning, net profit came in at Rs934mn (down 25% YoY). While sequential decline in slippages is positive, provision coverage ratio at 27.3% (flat QoQ) is still on the lower side to peers and needs some attention. Deposits grew by 6.5% YoY led by 15.6% YoY growth in CASA deposits; CASA ratio has inched to 28.6% (vs. 26.3% YoY).
– Margins on upmove; slippages set to moderate: NIM at 2.75% (calc) for the quarter is on an upward trajectory and is following continued efforts at a) containing overall cost of deposits (6.23% in Q2’18 vs. 6.3% in Q1’18) b) scaling overall loan-to-deposit ratio higher (Q2’18 LDR at 72.7% vs. 68.4% QoQ / 69% YoY) and c) garnering CASA deposits including recent reduction in SA rates (effective August, 2017). Levers are in place and will see overall NIM (calc) inch towards 2.9% by FY19E. Q2’18 slippages at Rs3.74bn included one large account of Rs2.3bn (housing-infra sector) that was downgraded to NPA. This account was earlier recognised as SDR and the bank carries adequate provisioning thereon. Standard restructured loans stood at Rs6.9bn and coupled with GNPA, SDR and S4A make for 6.5% of loans (vs. 8.6% in FY17). Commentaries on incremental slippages remain encouraging and we have factored the same into our estimates.
– Provisioning to impact near-term profitability; underlying trend intact: The trends on the operating front remain encouraging – loan growth momentum accelerating, NIM, loan-to-deposit ratio on an up-move, increasing contribution from core-fee income, improving CASA and stable operating costs. We thus have revised our NII / PPOP estimates upwards and are now factoring in 15.5% / 23.9% CAGR respectively over FY17- 19E. Slippages are set to moderate / decline in H2’18; provisioning however is set to remain higher given a) NPA ageing b) provisioning towards IBC cases and c) any markdown (if required) on the security receipt (SR) portfolio. The quarter saw SR related provisioning of Rs250mn; the bank has Rs4.5bn of O/s. SR. Given the above factors including the need to increase overall PCR we are factoring in 130bps of credit cost over FY17-19E. We expect the bank to report 24% CAGR in PAT over the similar time-frame
– Valuation, view and key risks: KBL Q2’18 results were in-line with our estimates on several fronts. We, however have tweaked our estimates on provisioning front. Though at a nascent stage of transformation, the bank has made strong in-roads in its journey of RoE improvement. The transformational exercise as envisaged will further augment overall RoE’s. Valuations at 1x FY19E ABV remain attractive. Retain Buy with TP at Rs200 (valued at 1.3x FY19E ABV). Higher than expected slippages and lower than expected credit growth remain near-term risks.”
Will Karnataka Bank be the next Heritage Foods
In the past, we have prospered immensely by listening to Vijay Kedia and acting obediently as per his instructions.
Heritage Foods is one example that comes readily to mind.
He recommended the stock in November 2015 as a “Diwali Gift” on the premise that the producer of dairy products like branded milk, cheese, butter etc would prosper immensely in the foreseeable future.
This has come true.
Novices who bought Heritage Foods on Vijay Kedia’s recommendation have a hefty gain of 220% in their portfolios and more appear to be on the way.
It should not come as a surprise to anyone if Karnataka Bank also delivers similar hefty gains!