Markets have given significant returns over the last one year. Here are a few stocks that have the potential to make money for investors in the coming months.
State Bank of India
This is the country's largest bank and has seen its share price fall from levels of Rs 314 to the current levels of Rs 244. A large part of the fall was only recently after Axis Bank declared a poor set of numbers.
However, at these levels State Bank maybe a good bet. The bank recently had its life insurance business successfully listed. The stock is trading at just about 1.8 times price to book.
The stock is also available way below its 200 day moving average of Rs 277. However, the one reason that merits attention of SBI is its holding in various subsidiaries. Let us take a look.
Holding in subsidiaries
Recently, a brokerage came up with valuations of SBI in its various subsidiaries and accordingly it arrived at a Rs 8 for its asset management company; Rs 45 for SBI Life, Rs 4 for SBI Capital Markets, Rs 3 for SBI cards and Rs 4 the general insurance business.
Remember, SBI also has very valuable stake in companies like NSE, BSE, NSDL, UTI AMC etc. This is amongst the biggest reason why the stock price of SBI at Rs 244 is not very expensive. We believe that as economic turnaround takes place, State Bank of India is likely to do remarkably well. The bank can report an EPS of Rs 25 by March 2019. The stock is thus available at a p/e of around 9 times this price. By the stock for a decent growth in the coming years.
Like SBI, ICICI Bank too has seen a significant drop in its stock price. The shares have dropped from levels of Rs 314 to the current levels of Rs 263. There are a few developments that could work in favour of ICICI Bank in the coming quarters.
The non performing assets from the lumpy steel book, should resolve in the coming quarters. Again, like SBI the company has tremendous value in its life insurance, general insurance and home finance business. Most importantly the shares have fallen to much lower levels, despite the market being at record highs.
Valuations very comforting
The stock of ICICI Bank is not too expensive at the current levels considering the huge valuations of the bank in its subsidiaries. The bank can report an EPS of Rs 22 by 2019.
Applying a very conservative valuations of 15 times, one can arrive at a price of Rs 320 in the next couple of years. The stock is not a bad bet at the current levels. The book value of the stock is expected to be around 185 by 2019.
Applying a price to book of around 1.5 times, we can again arrive at a price of Rs 320, which is an upside of 25 per cent from current levels.
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