Motilal Oswal's research report on SBI Cards and Payment Services
We recently initiated coverage on SBI Cards and Payments Services (SBICARD), highlighting the structural growth story and the unique play on rising retail credit that has been offered by the company. It has strengthened its position as the second largest card player in India, with a market share of ~19% in outstanding cards and ~20% in overall spends. It has an outstanding card base of ~11.5m and has doubled its card base over the past three years at an average incremental market share of 23%. We estimated loan book/earnings CAGR of 27%/47% over FY21-23E (RoA/RoE at 6.6%/28.4% in FY23E), however we initiated coverage with a Neutral rating owing to expensive valuations and limited upside to our TP of INR1,200.
Outlook
The stock has corrected ~11% since our initiation and is trading at 35x FY23E earnings, which is attractive given its strong fundamentals, earnings growth, and long-term structural story. At the CMP, the stock offers ~23% upside to our unchanged TP of INR1,200 (43x FY23E EPS). Consequently, we are upgrading our rating to Buy. Our earnings estimates stands unchanged.
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