ICICI Bank reveals it’s Q4 results and annual results for FY 08.
What I’m concerned with is the EPS contraction in the fourth quarter. In Q3, I’d noted that EPS growth was only 2%. In Q4, EPS was Rs. 5.68 versus Rs. 6.2 in Q4 FY07. This is an EPS contraction of 52 paise, or nearly 9%.
Note that again, carefully: EPS growth in Q3 was 2%, and in Q4, EPS growth was a NEGATIVE 9%. Slowdown, anyone?
Now for the financial year, diluted EPS was Rs. 32 versus Rs. 30.75 last year. That’s a 4% growth. At current price of Rs. 916, you are paying a P/E of 28 for this company. Now 28 P/E for slowing growth is a tad high, huh?
(Note that the official result statements show some 39% growth in profits. But that is an absolute number – they raised 20,000 cr. last year, which diluted the capital severely. If growth can only come from capital expansions, then we shouldn’t be paying this kind of P/E.)
Having said that – let’s conider the “weighted average EPS”, which has grown to 39.4 from 34.8, which is a 13.2% increase. Again, way lower than P/E. What’s more scary is that EPS growth is really slowing down in a quarterly manner.
Disclosure: No positions. Was short, but am out of that position now. I wouldn’t short this stock on Monday – the technicals look very strong. But the fundamentals are weak, and I think now it’s a matter of time before this stock goes down.
Note: This is not a bad company – it’s not going to be bankrupt. It has a lot of assets, and capital to support itself. But it cannot command such valuations with obvious growth pressure. The company is consolidating and the stock needs to do so as well. At the current price, there’s not much more left to go – but take 1/3rd off and maybe there’s a story.
Update 27/4/08: ICICI Bank’s 1 hour conf call provided more details.