jk bank logoWe are seeing a big jump of 10% today in JK Bank’s share price. If you are the regular readers on this blog then you will know that we use to like this stock. But we sold this business 3 months back because our opinion differed from the consensus analyst’s expectation.

Valueoperations platform had continuously pointed this stock with great earnings growth and also trading at cheap price from past 9 months. The platform works autonomously, means no emotions are attached to its results. It updates automatically with consensus earnings expectations every single day and updates the calculations of estimate intrinsic values.

We use this great platform to cross check our findings and opportunities available to investments in the stock market.

Valueoperations platform expects JK bank will report its profits for 2017 in range of Rs 237 crore – Rs 873 crore. So it comes out with estimate intrinsic values in range of Rs 12 – Rs 94 per share. Similarly, for 2018, it expects its profits in range of Rs 590 crore – Rs 1,048 crore. This translates that it is expecting its intrinsic value estimates in range of Rs 48 – Rs 132 per share.

In the first quarter of 2017 they reported Rs 22.88 crore as profits and they kept Rs 313.70 crore aside as ‘provisions and contingencies’. This figure represents almost 90% of operating income. In the last financial year they kept 59% of its operating profits aside as ‘Provisions & Contingencies’. We expect its operating profits in range of Rs 1,450 crore – Rs 1,600 crore for 2017 and do not expect much to change in 2018 too.

If we assume that business has no more issues with its rising NPA’s and they only need to keep aside 50% of operating profits as ‘Provisions’ then we should expect its 2017 profits in range of Rs 300 crore – Rs 370 crore. This translates into its estimate intrinsic value for 2017 to be Rs 24 per share. If we assume  same for 2018 then we are not expecting its profits to climb not more than Rs 850 crore and that gives us the estimate intrinsic value for 2018 to be Rs 91 per share.

Our funds risk profile did not permitted us to take the risk on 2018 expectations after looking its first quarter results and headwinds it is facing today.

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Aziz Dodhiya is the chief investment officer for the Valueoperations funds which operates in the Indian market as an FPI (Foreign Portfolio Investor). We do not offer any personal advice to buy or sell any stocks and the views that are shared by Aziz might not incline to your personal investment strategy and this is the reason we advise you to take professional advice before going ahead with our views.