I don't think at 18-19 TTM EPS, markets are discounting the best for HDFC bank.
It deserves a higher multiple if 30-40% profit growth is the expectation.

"I don't think at 18-19 TTM EPS, markets are discounting the best for HDFC bank.
It deserves a higher multiple if 30-40% profit growth is the expectation."

Diweshjee...that way its not just HDFC Bank that is trading at lower multiple. You will find hundreds of stocks that are trading at even more ridiculous levels. It is all relative.

If we assume that market will give HDFC Bank a better multiple ( say 30 times TTM EPS), then it means market has turned bullish. In that case, the rewards from other stocks will be higher. Meanwhile, underperformance will be punished more in HDFC Bank than other stocks is all I wanted to say.

"How sure are you of the performance?"

Let me take this question to my HDFC Bank and Kotak example. I mentioned as below :-

"If Kotak grows at 20 %, it will be more rewarded than HDFC Bank if it grows at 30%"

So, my answer is - I am as sure that Kotak will grow at 20% as HDFC Bank growing at 30% (say over 2 yr perspective) . The thing is, if I am right in both cases, my returns are similar ( assuming that market will give PE of 20 and 30 to Kotak and HDFC Bank respectively). Thats the reward part. Now the risk part. What is the probability that HDFC Bank will do below 30% compared to below 20% by Kotak? To each his own but risk is higher in HDFC Bank IMO.

1) Please note that I have taken Kotak as only an example. I have little idea about NPA,etc of this Bank
2) It must be noted that I have been extremely conservative i.e assumed only 20% growth in Kotak and PE after 2 yrs as 20. Kotak has grown and traded at much higher levels in the past.
3) As I mentioned earlier, my wife (whose stocks I consider as my own ) holds a very good number of shares in HDFC Bank and we have been rewarded well by this stock. I am only talking from current prices perspective where risk-reward is in favor of some other stocks.

Anyway, I think people might be getting the impression that I am against HDFC Bank per se which is not the case( every stock is good at a price ). I have made most points that I wanted to make so will refrain from commenting on this aspect again.

Even I completely agree that from current market price Kotak will give better returns than HDFC bank whenever the market recovers. In the last bear market to bull market also, Kotak has (even after the fall) significantly outperformed HDFC bank.

Kotak is best buy around 250/- levels if available. I feel it will be available given that their results will not be great.

Your returns from a stock will depend on at what price you enter the stock.

PS: I hold both Kotak and HDFC bank