What you are buying in this major correction ? PF readjustment!

An observation:

During 2008-09 crisis Icici bank was a trough mcap of around 34000 cr. At that time its ttm pat was appx 3600cr and networth was 47000 cr. Ttm pe worked out to 9-10x and pb was 0.7-0.8x.

Today its ttm pe is 11-12 and pb is 1.5x.

I look at pe and wonder that surely things are not so bad that India’s largest private sector bank should quote at a valuation that is a few points away from that during the worst time in recent history.

Using same yardstick Sbi was at trough valuation of pe 6.5 And pb of 1.

And today it is pe 8 and pb 0.8.

Large cap stocks are best bought when there is fear and pessimism surrounding them. Otherwise they are so well covered by the analyst community that it is quite difficult to find value many times.

Sbi pat has grown at cagr of 9% and networth at 17%. Over 2009-15. And valuations are at close to max pessimism levels.

Icici profits grew at 22% cagr and networth at 11% over 09-15.

current sbi chairperson has 6 months left in her job. Sbi performance could b tepid in this time.plus there is no saying what sort of clean up the new person will indulge in.so that’s a risk in sbi vs icici.

discl - taken a starter position in icici to test my thesis. may or may not add more.

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