RBL is indeed the forerunner along with YBL amongst the banks for partnerships in the FinTech space imo like Praveen has pointed out.
I had to share the relative valuation results which has been pending for a few weeks now. Not reiterating all the points covered before but very concisely putting down the plots/tables. I have put up more details on my ‘scrapnote’ blog (in my profile the link is there). I have put the rationale in the earlier posts too.
There were 2 ways in which we did this
Industry median based relative valuation -
Type A: PBV vs ROE (2 dimensional matrix)
Type B: PBV vs ROE vs EPS growth (3d matrix)
Actual PBV versus Regressed PBV
2D for 2017 (shared earlier)
(please open the pic for more clarity)
3D for 2017
(not able to paste the 3d matrix generated by R programming - still a learner there so put it on powerpoint!)
Regressed analysis for 2017 (shared earlier)
Now from our previous sections we had 4 outstanding investment candidates in this set of thirteen banks ie HDFC, KMB, IndusI, YBL. For the period 2014 to 2017 I have plotted the difference levels between actual PBV and regressed PBVs for these banks. The plot is below.
(please open the pic for clarity)
Results from this relative valuation approach:
- High PBV, ROE and Eg has translated to higher stock price growth. HDFC, YBL, KMB, IndusI have an average CAGR of ~23%+ from 2008 to 2017 with a median of ~25%. These 4 banks are the only banks which have consistently been valued at higher PBV multiples than industry medians. Also they are the top 4 banks in stock performance. Not a surprise!
- The banks which have consistently been valued at lower PBV multiples than industry median are SBI, BoB, PNB and Federal. SBI and PNB have had below 6% stock CAGR while Federal and BoB have fared better with 14% and 11% stock growth CAGR. In conjunction with the regression analysis we can say Federal looks to be a good option to bet on.
Conclusion is that the top 4 performers are always highly overvalued compared to industry but at the same time their earnings growth and ROE is always better than the industry median. So can we say that since they were overvalued we should not have invested? I don’t know.
p.s. if there is an error please send me a private message. i am a little skeptical of a few things in this because of the kind of data quality I have. Only if I had free data streams