Thanks @Krishna19 for writing in.
When we track a company, we need to see it as a evolving picture (credit Warrent Buffet and @Worldlywiseinvestors). So when I invested first time in September, latest Jun-23 net profit for the company was 123 crores, if I annualise it (assuming no seasonality in the business) then profit was 492 crores and market cap that time was about 9000 crores. So If based on peers I give PE in 25PE to 50 PE range then market cap should range in 12300 crores to 24600 crores. I assigned 30PE so thats how I got ~15000 crores market cap estimate.
Jun-23 | |
---|---|
Net profit | 123 |
Annualised profits (adjusting capital markets abnormality) | 492 |
Market cap based on 25 PE | 12300 |
Market cap based on 50 PE | 24600 |
Market cap at 30PE | 14760 |
However, as I said picture evolves, when Sep-23 results came out profit this time jumped to 145 crores but I saw there was sharp jump in capital market related revenue so I adjusted some profit for that. My valuation still remained around ~15000 crores.
Jun-23 | Sep-23 | |
---|---|---|
Net profit | 123 | 145 |
Adjust for abnormal capital markets profits | 120 | |
Annualised profits (adjusting capital markets abnormality) | 492 | 480 |
Market cap based on 25 PE | 12300 | 12000 |
Market cap based on 50 PE | 24600 | 24000 |
Market cap at 30PE | 14760 | 14400 |
Now in Dec-23 when company announced the results it reported whopping 176 crores of profit. Again there was huge capital market related profits. so I adjusted that. Even after making some adjustement my market cap estimate increased to ~17000 crores.
Jun-23 | Sep-23 | Dec-23 | |
---|---|---|---|
Net profit | 123 | 145 | 176 |
Adjust for abnormal capital markets profits | 120 | 140 | |
Annualised profits (adjusting capital markets abnormality) | 492 | 480 | 560 |
Market cap based on 25 PE | 12300 | 12000 | 14000 |
Market cap based on 50 PE | 24600 | 24000 | 28000 |
Market cap at 30PE | 14760 | 14400 | 16800 |
However, when I attended the concall of Dec-23, management highlighted that most of capital market profits will remain stable in near term as they have 2 quarters visibility on the same. With this I reduced my adjustment on capital market profits. As a result my market cap estimate rose to 19200. However, additional information given by management that industry will be 4x in size in a decade and they shall grow in 20-25% range for a decade. So what kind of valuation should I give a company when it is guiding for 20-25% growth for a decade? I give 40PE, so just based on all these factors I have now new market cap estimate of ~25000 crores. Please note that company will gain operating leverage also. I suggest you to read latest company concall transcript.
Amit Jeswani started with first question. In his question he mentioned that globally he has seen that wealth management companies grow 3x to 5x of a country’s benchmark indices. So for example: if Nifty doubles in 7 years then Nuvama can be 3x to 5x.
Somebody has done global work also for me. Thats why concalls are so important.
Jun-23 | Sep-23 | Dec-23 | Dec-23 (post concall) | |
---|---|---|---|---|
Net profit | 123 | 145 | 176 | 176 |
Adjust for abnormal capital markets profits | 120 | 140 | 160 | |
Annualised profits (adjusting capital markets abnormality) | 492 | 480 | 560 | 640 |
Market cap based on 25 PE | 12300 | 12000 | 14000 | 16000 |
Market cap based on 50 PE | 24600 | 24000 | 28000 | 32000 |
Market cap at 30PE | 14760 | 14400 | 16800 | 19200 |
My valuation post concall at 40 PE | 25600 |
Note that these are my assumptions and shared for learning purpose.
Disclosure: Invested in Nuvama and transacted in last 30 days. This is now my second largest position.
Disclaimer: I am not a financial advisor and nor a SEBI registered Analyst. The content shared here is only for learning purpose. All the names mentioned here are for example purpose. I may buy more, exit or partly sell the stock/bonds without any prior intimation
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