Gruh Finance

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

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  1. pradip

    pradip Member

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    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 )))
     
    pradip, Jun 14, 2015
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  2. stockguru

    stockguru Active Member

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    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/
     
    stockguru, Jun 14, 2015
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  3. pradip

    pradip Member

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    Many thanks ))
     
    pradip, Jun 14, 2015
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  4. Meenakshi Razdan

    Meenakshi Razdan Administrator Staff Member Moderator

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    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.
     
    Meenakshi Razdan, Jun 15, 2015
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  5. stockjeet18

    stockjeet18 Member

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    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 ..!
     
    stockjeet18, Jun 15, 2015
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  6. pradip

    pradip Member

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    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 )))
     
    pradip, Jun 15, 2015
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