A very pertinent question is how does one assign a multiple to bank like Kotak? The bank is growing it’s book value per share at the rate of 15% yoy every quarter without fail. Also, the bank has been able to keep NNPA close to zero with advances growing at 15-20% yoy every quarter.
With Indian economy projected to grow at 6% for next decade this bank is well poised for a healthy long-term growth.
If history is any judge here are the historical multiples for the bank
Price/Book
21/oct/23 = 1769/605 = 2.9x
22/jul/23 = 1971/584 = 3.4x
21/jan/23 = 1760/540 = 3.25x
22/oct/22 = (1800/519) = 3.5x
27/apr/17 = 4.3x (900/209)
30/apr/18 = 4.5x (1222/264)
19/jul/18 = 5.1x (1400/272)
01/may/19 = 4.3x (1300/305)
22/jul/19 = 4.6x (1450/313)
Also look at the historical price to book value from the screener, median price to book is 4.4. So again the same question what price to book multiple will you assign to Kotak bank??
I think sometimes Mr. Market gives us Gold at the price of Copper and this is one of the case. Of course no one can time the market so we don’t know how long we have to hold to get some returns.
The only unsolved question from my end is, has the price to book value growth of Kotak bank slowed down, was it growing at 20% on an average between 2010 and 2020? I don’t have data for this.
Disclosure – Invested and biased.
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