I think right now is the best time to be invested in hdfc bank stock given the current valuations of the indian markets or even its peers.The markets are run on perception not long back there markets gave big companies like hul and hdfc bank and other large caps stock a higher valuation as these stock were considered to big to fall and the smallcaps and midcaps traded at significant discount as the perception was there is not much information known about the companies and are risky which soon changed to small/mid caps can grow faster.Not long back psu were given lower valuations as they worked for the nation not for the profit of shareholders and soon the perception changed of them being a monopoly .Now we don’t know when will this happen to hdfc but currently it trades at a significant discount then it ever has in the past.
No one can predict for how long the stock can trade for such a discount but let’s say it keeps on trading at price to book value of 2.5, which is the lowest it has ever been for the bank .The bank this year will 90 Rs as eps and i think it might give 20 rs given as dividend so it will add 70 rs to it’s book value eyery year and this figure is only going to increase every year as they have more money to loan out which is not borrowed and it is there own book value.But lets just stick to the most conservative estimate that the bank keeps on trading at price to book of 2.5 .which means that stock would have to appreciate by a minimum of 70*2.5=175rs every year to keep up the lowest valuations it has traded at.I know plenty of value investors has picked up the stock in the recent crash at 1400 levels so at a dividend of 20 rs and stock appriciation of 175 rs on 1400rs is almost 13 to 14% and it only going to increase every year,Tbh i am very happy to get 14% returns which are super safe.
Coming to the point of low deposit ratio i feel it is just a perception and soon it will change for me it is good thing as for a bank the deposits are it’s supply and the people who take out loans are there demand .With this logic the hdfc bank is currently at full capacity utilisation, which to me means sooner or later they have the the choice to charge higher interest but also choose better creditor with a better credit history and i am not even touching on the point that millennials take up more loan for there cars ,houses etc etc compared to Gen X.
disc: i am very optimistic about the stock and invested almost all of portfolio in it as i feel this is the next itc given the memes i have been seeing.
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