HDB
HDFC Bank Limited
$21.70
Banks, Insurers & Asset Managers
85%
P/Tangible Book × ROE Quality
Strong
·
Conviction
Undervalued
Trading 51.3% below fair value
You pay
$21.70
Bear
$28.95
Fair
$44.59
Bull
$47.10
Bear
$28.95
+33.4%
ROTCE 10.4% → 2.46x TBV
Fair
$44.59
+105.5%
ROTCE 13.9% → 3.79x TBV
Bull
$47.10
+117.1%
ROTCE 16.0% → 4.00x TBV
Adjust Assumptions
13.9%
6.6%
Key Value Driver
ROTCE (13.9%) vs. cost of equity (6.6%)
Implied Market Multiple
1.84x
Summary
With ROTCE of 13.9% vs. 6.6% cost of equity, fair P/TBV is 3.79x on $11.78 tangible book, implying $44.59 per share. DDM cross-check: $57.64.
Warnings
Traditional cash flow models don't work well for banks — lending activity distorts how much cash the business actually generates.
Common valuation shortcuts don't apply here — for banks, interest payments are a core business cost, not overhead.
Dividend-based valuation: $57.64 (29% above our primary estimate). Large gaps suggest the dividend may not fully reflect the company's value.
Financial statements were converted from INR into USD using USDINR at 0.0105 USD per INR.
Key Risks
- Book value quality matters as much as level — check loan loss reserves
- Interest rate sensitivity creates non-linear earnings surprises
- Insurance reserving is actuarial, not financial — errors emerge slowly