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RARE VALUE IN AN EXPENSIVE MARKET
While investing, the entry price of a stock is ex-
tremely critical. As Buff ett mentions that a good
company may not necessarily be a good stock.
Here again ICICI Bank off ers a lot of comfort. The
stock trades at 1. 3 x FY 19 core book. This is over
50 % discount to its private sector retail lenders,
HDFC Bank and Kotak Mahindra Bank. Also, it
trades at 20 % discount to private sector corporate
peer Axis Bank, despite being at a more advanced
stage of its recognition cycle. Also, relative to its
own history, the stock is 20 %- 25 % cheaper than
what its valuations were in the previous growth
phase ( 2003 - 08 ). While the stock is up 36 % in 2017 ,
its three-year return is zero and last 10 -year CAGR
is just 4 % — same as the savings rate. Hence, when
things improve it is only a matter of time before in-
vestors start valuing it more appropriately.GOOD TIMES AHEAD
In short, ICICI Bank fi ts all the desired criteria that
a long-term value investor would look out for. While
there could be some volatility, the stock is poised to
deliver good return over the long-term. To me the
bank’s prospects are very similar to that of Reliance,
a year ago. Aft er staying rangebound for almost a de-
cade, RIL rallied sharply as it delivered on execution.
While past performance is no guarantee of future re-
turn, I would be very happy even if ICICI Bank per-
forms half as well in 2018 as RIL did in 2017. b
The brokerage has a buy call on the stock, but the writer
does not own the stock in his personal capacityCY17 RETURN 32%
net profit#11 ,340cr
ttm p/b (x)1.9
roa 1.19%