Doubling the net profit and doubling the price are totally different things. Repco would surely double PAT in 3 years. Or maybe even better. But will a mortgage finance NBFC command 35 PE forever? We need to check history for this. In 2006-07 banks like Axis and HDFC Bank were growing at 40%. Mortgage lender HDFC was growing at 35%. They all used to command PE’s of 35-45. Did those PE’s sustain?
NBFC’s or any bank for that matter will not trade at more than 25 PE forever, irrespective of quality. Even best of the best HDFC Bank has been derated on PE front in past few years. Do we really believe Gruh and Repco will sustain 45 and 35 PE?
I am confident that both Gruh and Repco will grow at 25% for at least 4-5 years. Price growing at 25%? Not going to happen. That’s only point I would like to put forward. But as usual different opinions make market.
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