Motilal Oswal's research report on SBI Cards and Payment Services
SBICARD reported a steady 1QFY22, with a sharp beat in earnings, supported by lower provisions, as operating performance came in line. Overall spends/receivables witnessed a sequential decline due to the lockdown during Apr-May’21, while showing a gradual improvement from Jun’21 onwards. Margin too witnessed an expansion of ~160bp, led by an improving loan mix, while fee income stood largely stable QoQ. Asset quality ratios saw a significant improvement, led by higher write-offs, while the RBI RE book declined to INR13.8b (6% of loans v/s 8% in 4QFY21). It has provided a further 65%/100% on 30-90/90 days delinquent RBI RE book. This, along with a strong PCR (~78%) and management overlay provisions of INR2.58b, should keep credit cost under control. We increase our FY22E/FY23E estimates by 11%/19%. We maintain our Buy rating.
Outlook
We estimate RoA/RoE to improve to 7.9%/30.5% in FY23E. We maintain our Buy rating with an unchanged TP of INR1,200/share (41x FY23E EPS).
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