SBI stock may rally another 40% after hitting record high
Published On: Thursday, February 11, 2021 | By: Team KnowMyStock
SBI with nearly 20-25 percent market share which recorded a beat on its quarterly earnings, 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 percent decline in net profit at Rs 5,196 crore for the 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 percent compared with 5.28 percent in the preceding three months. Moreover, its net NPA ratio was at 1.23 percent, down 36 basis points sequentially. Analysts had expected GNPAs to rise to over 6 percent. Such a healthy performance, analysts say, should help the bank reach a 10 percent 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 percent and 1.4 percent, respectively. The core operating profit in our view will remain in the 1.5-1.7 percent range and higher capital gains from stake sales in subsidiaries should protect overall profitability,” said an analyst.
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).
Tags: SBI Q3 results
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