Gruh Finance

Discussion in 'Ask A Query About Your Stock Picks And Portfolio' started by pradip, Jun 14, 2015.

  1. pradip

    pradip Member

    Joined:
    Jun 11, 2015
    Messages:
    34
    Likes Received:
    16
    Hi,
    Hope you all are fine !

    @Meenakshi Razdan @Vidhi Khanna @stockguru

    Would request for your insights on how would you calculate the right price to buy the company.
    My thought will be - PE@ 30 is a reasonable price. So this translates to a price of Rs.180-190 at current level of company's profits.

    Apologies for bothering you with so many queries ! But as you understand, you pay a price in being popular )))
     
  2. stockguru

    stockguru Active Member

    Joined:
    May 29, 2015
    Messages:
    199
    Likes Received:
    80
    Well, I haven't researched much on this company but recently Vivek Bothra did an indepth research on this in his blog. I haven't yet read that article but I am giving below the link to the article. Also you can read his other posts, those are very knowledgeable.

    https://www.tankrich.com/2015-22-annual-review-gruh-finance/
     
    pradip likes this.
  3. pradip

    pradip Member

    Joined:
    Jun 11, 2015
    Messages:
    34
    Likes Received:
    16
    Many thanks ))
     
  4. Meenakshi Razdan

    Meenakshi Razdan Administrator Staff Member Moderator

    Joined:
    Mar 19, 2015
    Messages:
    427
    Likes Received:
    150
    I think seeking to "value" Gruh Finance may be an exercise in futility. There is something magical about the stock that enables it to command almost "irrational" valuations. Even today, it is quoting at a P/E of 35x and a PBV of about 11x. These are exorbitant by any standards but it has continued for a long time and will probably continue to do so in the foreseeable future. In fact, even the parent, HDFC Ltd, whose quality and management capability is unquestionable, is quoting at a P/BV of 'only' 4x.

    It is hard to understand what is the special charm that Gruh enjoys that its peers like Repco and the others do not have. Probably, the parentage & management (HDFC), the high ROE (~26%), the high dividend payout (~28%), the dominance in the affluent State of Gujarat, etc may explain some of the premium that the stock commands.

    However, the problem with such stocks is that they tend to stagnate and underperform their peers. HDFC Bank is an example of this. However, it is the ideal "buy-n-forget" sort of stock.
     
    pradip likes this.
  5. stockjeet18

    stockjeet18 Member

    Joined:
    Mar 21, 2015
    Messages:
    121
    Likes Received:
    26
    HDFC has its own housing loan division whether it may put some limitations on the growth path of gruh ..? ... I think repco doesnt hav this kind of limitations in terms of conflict of interest from the parent company ... Its my thinking only and i dont know whether my perception s right or wrong ..!
     
  6. pradip

    pradip Member

    Joined:
    Jun 11, 2015
    Messages:
    34
    Likes Received:
    16
    Thanks for your insights Meenakshi. Yes, I agree, the valuation of the stock is irrational currently

    To quote Warren B, I think we should not mind paying a 'premium' price for good companies.

    I bought the company today at CMP 200 )))
     
Loading...