SBI Cards shares get 'Buy' rating from Yes Securities, over 45% upside seen
Premium- The brokerage has reiterated its bullish stance on SBI Cards shares on sustained encouraging core trends across business matrices
Being the only listed pure-play credit card issuer with significantly higher profitability than Banks and NBFCs (in good times as well as bad times), SBI Cards and Payment Services would continue to command a premium valuation, believes domestic brokerage and research firm Yes Securities.
The brokerage house has maintained its Buy rating on SBI Cards shares with a target price of ₹1,210, implying a potential upside of about 45% from current stock level. Shares of SBI Cards have fallen 10% this year (YTD).
“Notwithstanding continuing overhang pending RBI’ discussion paper on review of the Digital Payment Charges, we reiterate our bullish stance on SBI Cards on sustained encouraging core trends across business matrices," the note stated.
SBI Cards' recent stock price decline, as per Yes Securities, represents overstretched concerns on MDR reduction and lack of flexibility to recoup it, structural pressure on cost-income/profitability from increased competitive intensity, and impact on growth from rising scale of the new-age card companies and Buy Now Pay Later (BNPL).
“We believe card acquisition/spend growth will remain strong for SBI cards due to market under-penetration/expansion, strong open market acquisition channel and a substantially untapped banca channel (penetration in SBI’s potential customer base at <5%)," the brokerage added.
Yes Securities highlighted that SBI Cards has witnessed a sharp recovery in both retail and corporate spends in recent quarters and across varied spend categories/channels. Even the lagging Travel & Entertainment segment has picked-up in past few months.
Recovery in economic activity, strong card addition, recovery of 30-day spends active rate and increase in average transaction size would keep driving growth in retail and corporate spends, it said. “SBI Cards delivers higher profitability across cycles and thus deserves higher valuations."
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The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.