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2 Consistent Compounder Stocks

HDFC Bank and Kotak Bank are identified as two consistent compounder stocks. Reasons include their focus on retail banking and unused opportunities to unlock value through listings of subsidiaries. HDFC Bank and Kotak Bank trade below their 3-year median P/E ratios, indicating potential for growth. Both have shown strong profitability over 5 years, with CAGRs around 20%, though growth slowed in the last year due to the pandemic. Overall, these banks are seen as consistent compounders due to their clear focus on growing key business segments.

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Kunal Khandelwal
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83 views2 pages

2 Consistent Compounder Stocks

HDFC Bank and Kotak Bank are identified as two consistent compounder stocks. Reasons include their focus on retail banking and unused opportunities to unlock value through listings of subsidiaries. HDFC Bank and Kotak Bank trade below their 3-year median P/E ratios, indicating potential for growth. Both have shown strong profitability over 5 years, with CAGRs around 20%, though growth slowed in the last year due to the pandemic. Overall, these banks are seen as consistent compounders due to their clear focus on growing key business segments.

Uploaded by

Kunal Khandelwal
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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2 Consistent Compounder Stocks

Which are the two consistent compounder stocks of the stock of the stock market? Let’s find out as
we go ahead…

Introduction:

The 65% of the banking sector is controlled by the public sector banks whereas only the 35% is
controlled by private banks, but this scenario can be completely reversed after a period of time and
private sector banks can control 65% of the market share in India. After the pandemic situations,
HDFC Bank and Kotak Bank are the two which are looking strong and risk averse.

Reasons why these two stocks can be consistent compounders:

 These two banks are increasing their focus on the retail banking and the HDFC Bank is
especially looking more into the corporate banking business.
 Both the banks have strong liabilities portfolio as well which fund their short term assets in
terms of term deposits and CASA.
 Various value unlocking opportunities are also available for both the banks. In case of HDFC
Bank, HDB Financial or HDFC Securities can also list in the coming time.
 HDFC Cards which is a no. 1 player in the market can also list in the stock market.
 In case of Kotak Bank, Kotak AMC, Kotak Life, Kotak Securities, etc. are also not listed in the
stock market.

Valuation:

1. HDFC Bank:

 The 3 year median P/E of HDFC Bank is at 26.84x whereas the current P/E is at 26.07x which
is below 3 year P/E.
 In 10 years the stock is trading at the same P/E levels which means that despite being at
premium valuation, the stock is proved consistent compounder.

2. Kotak Bank:

 The 3 year median P/E of Kotak Bank is at 36.3x whereas the current P/E is at 33.84x which is
below 3 year P/E whereas 5 year median P/E stands at 35.59x.
 In 10 years the stock is trading below median P/E levels which means that the stock has a
high potential.
Profitability:

1. HDFC Bank:

 The 5 year CAGR of profit growth is at 19.98% whereas the 3 year CAGR is growth in the
profits for the company is at 19.81%.
 The 1 year TTM growth of the company’s profit fell to 16.8% which is due to hard times in
the last year.

2. Kotak Bank:

 The 5 year CAGR of profit growth is at 23.06% whereas the 3 year CAGR is growth in the
profits for the company is at 20.26%.
 The 1 year TTM growth of the company’s profit fell to 16.25% which is due to hard times in
the last year.

Conclusion:

These 2 banks as we can see are consistently increasing their profits as well as growth opportunities
are immense. They are consistent compounders because they have a clear focus on which segment
to focus and not like cyclical stocks.

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