ICICI Bank (IBN) - Diversified investment in India's economy.
I am looking to benefit from investing in India's economy and I had found a few different investment ideas. ICICI bank is the 2nd largest bank in India, it has recently surpassed analysts expectations, its growth over time, as well as the share price, has been growing in a reasonable manner which presents a good long term opportunity - providing steady growth, an exposure to India's economy and hopefully little volatility.
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ICICI bank has:
3,200 retail branches
1,700 rural branches
39 international branches (Canada and the UK)
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Main revenue generating segments:
Retail banking
Wholesale banking
Treasury
Other banking services (Venture, home finance, insurance)
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ICICI Bank are building India's first "truly universal super app"
We take this for granted in North America, but apparently, this is not widely available for people in India. They are creating what they deem to be the first of India's all-purpose banking apps
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They provide payment processing services for businesses and retailers (Think what Lightspeed LSPD does)
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Competitive advantages:
- Recognized brand name
- 2nd largest bank in India
- investment in technological advances (such as mobile banking)
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Investing in India
- More on this later, not enough time for now. The working theory for me personally is that India is flourishing, it will experince a much faster than average population growth, higher income, more prosperity which will result in good returns in investments made in India.
This is a big part of the thesis here. I would not take the trade otherwise if I am not anticipating growth in India stocks.
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Why the bank?
Appears to have a long term growth runway present because of the following:
- Rising income
- Rising demographic profile of young persons
- Fastest growing populations
- Increasing prosperity in India over a period of time
- (sadly) declining prosperity in North America - will in my opinion shift towards China and India in the future.
- Rising growth in the Fin tech space
- ICICI will be able to diversify and capitalize on growing industries in India including Tech and IT.
- Increase in online payments for monthly bills via banking.
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Valuation
Projected valuation based on 5 years of anticipated growth.
TTM EPS = 0.84
Analysts expected growth rate over 5 years = 81.60%
Actual equity growth rate over last 4 years = 11.16%
I will use a growth rate of 12 percent to be fair
Average PE ratio over the last 5 years = 37.98
What will EPS be in 5 years?
1.48
multiplied by Average PE ratio = 56.21
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The desired ROI
Over 5 years, I am pencilling out that the share price should trade at a price of 56.21
which is more than double the current price of 21.18
which puts me at an anticipated growth of more than 15% per year on this trade should it work out.
I am happy with those returns, and, in absence of new news, or faster than expected growth, my price target is at
24.36 by February 2023
28.17 by February 2024
37.47 by February 2025
49.84 by February 2026
66.29 by February 2027
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__________________________________________________________________
ICICI bank has:
3,200 retail branches
1,700 rural branches
39 international branches (Canada and the UK)
__________________________________________________________________
Main revenue generating segments:
Retail banking
Wholesale banking
Treasury
Other banking services (Venture, home finance, insurance)
__________________________________________________________________
ICICI Bank are building India's first "truly universal super app"
We take this for granted in North America, but apparently, this is not widely available for people in India. They are creating what they deem to be the first of India's all-purpose banking apps
__________________________________________________________________
They provide payment processing services for businesses and retailers (Think what Lightspeed LSPD does)
__________________________________________________________________
Competitive advantages:
- Recognized brand name
- 2nd largest bank in India
- investment in technological advances (such as mobile banking)
__________________________________________________________________
Investing in India
- More on this later, not enough time for now. The working theory for me personally is that India is flourishing, it will experince a much faster than average population growth, higher income, more prosperity which will result in good returns in investments made in India.
This is a big part of the thesis here. I would not take the trade otherwise if I am not anticipating growth in India stocks.
__________________________________________________________________
Why the bank?
Appears to have a long term growth runway present because of the following:
- Rising income
- Rising demographic profile of young persons
- Fastest growing populations
- Increasing prosperity in India over a period of time
- (sadly) declining prosperity in North America - will in my opinion shift towards China and India in the future.
- Rising growth in the Fin tech space
- ICICI will be able to diversify and capitalize on growing industries in India including Tech and IT.
- Increase in online payments for monthly bills via banking.
__________________________________________________________________
Valuation
Projected valuation based on 5 years of anticipated growth.
TTM EPS = 0.84
Analysts expected growth rate over 5 years = 81.60%
Actual equity growth rate over last 4 years = 11.16%
I will use a growth rate of 12 percent to be fair
Average PE ratio over the last 5 years = 37.98
What will EPS be in 5 years?
1.48
multiplied by Average PE ratio = 56.21
__________________________________________________________________
The desired ROI
Over 5 years, I am pencilling out that the share price should trade at a price of 56.21
which is more than double the current price of 21.18
which puts me at an anticipated growth of more than 15% per year on this trade should it work out.
I am happy with those returns, and, in absence of new news, or faster than expected growth, my price target is at
24.36 by February 2023
28.17 by February 2024
37.47 by February 2025
49.84 by February 2026
66.29 by February 2027
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