Buy State Bank of India: target of Rs 280: Sharekhan

Sharekhan's research repor on State Bank of India

State Bank of India’s (SBI’s) Q2FY2021 numbers largely met expectations, wherein operational numbers were in-line, but asset quality performance was mixed. Collection efficiency for domestic loans (excl. agri loans) is at an encouraging 97%. However, on a normalised basis, asset quality deteriorated marginally, with GNPA and NNPA ratios increasing by 44 bps and 22 bps, respectively. Asset quality picture appears manageable, PCR of 88.2% is a cushion for investors; legacy assets are well-provided for; margins expected to be stable.

Outlook

SBI currently trades at 0.8x / 0.7x its FY2022E / FY2023E book value; we maintain a Buy rating on stock with an unchanged SOTP-based PT of Rs 280.

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