ICICI: The Top Way to Bank on India

05/01/2014 10:00 am EST


Nicholas Vardy

Editor, Oxford Wealth Accelerator

In 2006, India was the second-fastest growing economy in Asia; after the financial crisis of 2008, this economic miracle came to a screeching halt, recalls Nicholas Vardy, editor of Alpha Investor Letter.

Recently, however, investor sentiment has started to improve and its stock market appears to be back on track.

Strong macroeconomics, combined with the prospects of a new business-friendly government, support the hope that the Indian stock market will have a very strong year in 2014.

Our latest recommendation, ICICI Bank (IBN), is a bet that the Indian economy and stock market will find its mojo once again. ICICI Bank offers the single best way to profit from this turnaround in investor sentiment.

Headquartered in Mumbai, ICICI is the second-largest private-sector bank in India and the only privately owned, truly universal bank in India. Even with 3,753 branches in India, and a presence in 20 countries, this Indian financial giant still has incredible growth ahead of it.

ICICI Bank has a leading position in the insurance, private equity, asset management, and investment banking industries. ICICI Securities is one of the top brokerages in India. ICICI Ventures is one of the leading private equity firms in India.

Two of its insurance joint ventures—ICICI Prudential and ICICI Lombard—are the leaders in the life insurance and non-life insurance sectors. And importantly, ICICI Bank may soon be allowed to list these insurance companies as separate entities.

That could unlock substantial value and further boost the bank’s own stock price. And what about ICICI Bank’s outlook for the coming year?

Consensus estimates for the current and next year are now $2.81 and $3.28 per share, up from $2.68 and $3.08 per share, respectively. The current estimate calls for earnings-per-share growth of 16.7%.

ICICI Bank is not expensive. With a forward P/E of 13, and the company’s price/earnings to growth (PEG) ratio of 0.7, ICICI Bank still offers terrific value.

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