When State bank of India (SBI), with nearly 20-25 per cent market share, records a beat on its quarterly earnings, especially amid a global pandemic, the feat is sure to invite re-rating from analysts.
The series of price-target upgrades continued for the sixth consecutive quarter for the state-owned lender as it reported a 7 per cent decline in net profit at Rs 5,196 crore for quarter ended December 2020. That compares with the Rs 4,479-crore consensus estimate of analysts tracked by Bloomberg.
On the asset quality front, SBI’s gross non-performing asset ratio stood at 4.77 per cent compared with 5.28 per cent in the preceding three months. Moreover, its net NPA ratio was at 1.23 per cent, down 36 basis points sequentially. Analysts had expected GNPAs to rise to over 6 per cent.
Such a healthy performance, analysts say, should help the bank reach 10 per cent return in equity (RoEs) over the next 2 years.
“Given the stable asset quality and the additional buffers created, we lower credit costs by 20bps for FY22/23e to 1.6 per cent and 1.4 per cent, respectively. The core operating profit in our view will remain in the 1.5-1.7 per cent range and higher capital gains from stake sales in subsidiaries should protect overall profitability,” said analyst at Investec in a post-result report.
On the back of a nearly 22 per cent upgrade to FY22e PAT and a 7 per cent upgrade to book value of equity per share (BVPS) post the results, the brokerage has increased its valuations multiple to 1.0x (from 0.7x) and value of subsidiaries in SOTP to Rs 115 (from Rs 90) leading to revised target price of Rs 430 (from Rs270).
At the bourses, the stock is around 4 per cent off its record high of Rs 408, touched on February 5, 2021. So far in the calendar year 2021, the stock has soared 42.6 per cent on the BSE, as against a 10 per cent in the benchmark S&P BSE Sensex.
Here’re the latest price targets on the stock by various brokerages:
| Brokerage | 1-yr target price (in Rs) | Upside (in %) |
|---|---|---|
| Investec | 430 | 9.6 |
| JPMorgan | 440 | 12.2 |
| Macquarie | 450 | 14.7 |
| Credit Suisse | 460 | 17.3 |
| UBS | 430 | 9.6 |
| CLSA | 560 | 42.8 |
| Jefferies | 480 | 22.4 |
| Morgan Stanley | 350 | -10.7 |
| Prabhudas Lilladher | 445 | 13.5 |
| Emkay Global | 460 | 17.3 |
| YES Securities | 440 | 12.2 |
| Motilal Oswal Financial Services | 475 | 21.1 |
| Source: Respective research reports | ||
| Note: Upside against BSE closing price as on Feb 10, 2021 | ||
Dear Reader,
Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.
As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.
Support quality journalism and subscribe to Business Standard.
Digital Editor
RECOMMENDED FOR YOU