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xbox
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Joined: 10/Sep/2006
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   Posted: 08/Nov/2006 at 2:53pm |
Here I compare YB with HDFC bank.
HB has 530 branched and market cap is 31-32K crr. where as YB is planning to open 250 branches by 2010. So onthis logic, YB should fetch half of MC of HB. that is 31K/2 = 15.5 K or so.
Assuming 3% euity dilution each year till 2010, It will have equity of 31 Cr. It means, it's price should touch 15.5 K / 31 = 500.
On Fundamental view, I have calclulated EPS to be 30 by then, assuming PE of 15 (whereas HDFC Bank fetches 22 right now). It's price will be 30 * 15 = 450. So broadly one can find YB between 400 to 500 by 2010.
I feel YB will start giving dividends after 2008, so take 2 years of dividends as bonus.
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Don't bet on pig after all bull & bear in circle.
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basant
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Posted: 08/Nov/2006 at 3:28pm |
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Vipul ji. This broad sense of reasoning makes a lot of sense.I would go with you except that we may discount Yes Bank a bit since HDFC Bank has a history strong pedigree etc etc. STill the concept makes a lot of sense.
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tyler_durden
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Posted: 08/Nov/2006 at 4:44pm |
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great analysis using common sense i ll surely add yes bank to my portfolio on dips.
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basant
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Posted: 08/Nov/2006 at 6:46pm |
We have discussed the business and operations of Yes Bank. While the story looks good over the longer term investors should understand that the price reflects all that for the time being. But the beauty of holding such companies is that as time passes by the earnings increase and the stock looks cheaper again. I am betting on the same set of events to unfold itself into Yes Bank.
Using the PE would not be the appropriate way to value Banking stocks. The better way would be to look at the Price to Adjusted Book and the RoE (This is the mother of all tools).
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Current Price |
Rs 110 |
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Adj B.V Fy 08 |
Rs 44 |
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Price to Adjusted Book |
2.5 times |
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EPS Fy 08 |
Rs 7 |
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RoE |
16% |
The RoE is on the lower side but the once the Bank sets up its customer base and is able to create a set of depositors it should start earning on fee income which is the best a Bank can do. Fee income comes with lowest or rather no risk and adds directly to the bottomline.
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s_praharaj
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Posted: 08/Nov/2006 at 6:57pm |
Thanx Vipulji for the calculation.
You have reasons to put YesBank market rate at 450.00 in 2010.
I also beleive that.
But HDFC Bank has proved it.
There are so many other factors which depend on the success of a Bank.
HDFC Bank has the lowest or negligible NPA in the banking industry. Yes Bank has 90% corporate loans. One single NPA can make a lot of difference for a small bank like Yes Bank. True NPA will come to light after it operates successfully for 4-5 years. YesBank to come to status of HDFC Bank has to improve their retail lending to atleast 30%, now less than 10%.
Business per employee is also very high for HDFC Bank. I do not know that for YesBank.
Though we can not compare now HDFC Bank with Yes Bank, we have to be very cautious. We have to watch very carefully the happenings at Yesbank.
God willing it may be a better bank than HDFC Bank.
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Shashi Praharaj
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India_Bull
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Joined: 19/Sep/2006
Location: United States
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Posted: 08/Nov/2006 at 7:40pm |
Hi Basantji,Vipulji,
Read somewhere they(Yes Bank ) are going to be in microfinancing, which is a bbig concept..Can anyone confirm this ?
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India_Bull forever Bull !
www.kapilcomedynights.com
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xbox
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Posted: 08/Nov/2006 at 4:29am |
Basant Jee, I am sorry but I disagree with you on this point. YB also has strong promotor. HDFC promotor has proved it, so looks better as compared now. But YB having such a strong FIIs are day one, proves the facts that Kapoors are stong Bankers. Any idea on when HDFC Bank was started, how much was owned by FIIs. Please some member show this historical stats for benifits of all.
Now comes to PE discounting. I see no reason to change this. HB is doing just banking operation, all other financial operations are handled by HDFC (like asset manegement, insurance, morgages etc etc.), whereas one can think of YB having all of these operations (as and when they kick-off these). YB has shown interests in AssetManagement. Investmetn from swis insurance company give me feeling that YB may also look for life/non-life insurance in times to come.
So by 2010, YB's EPS willbe much higher than what I conservatively calculated. EPS of 30 by 2010, is based on pure banking operations. At 2010, YB has more space to open new branches than HB of now. So, I feel YB should fetch higher PE as compared to HB, but then it pays to be conservative. So, I gave PE of 15.
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Don't bet on pig after all bull & bear in circle.
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basant
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Posted: 09/Nov/2006 at 1:47pm |
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Point taken. But if Yes Bank has a valuation of HDFC Bank it would be some thing to talk about. Not saying that it will not happen but if it does then this stock could go places really.
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'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in
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