Neutral SBI Cards; target of Rs 850: Motilal Oswal

Motilal Oswal's research report on SBI Cards

SBI Cards (SBICARD) reported a healthy beat on PAT in 4QFY24 amid lower opex (20% lower than our estimate). PAT jumped 21% QoQ to INR6.6b, while NII inched up 2% QoQ (in line).Margin declined 39bp QoQ to 10.9% on the back of a sharp decline in yields on a quarterly average basis. The share of revolver mix improved to 24% vs. 23% in 3Q, while EMI mix declined to 37% vs. 38% in 3Q. Spending growth decelerated by 18% QoQ, as corporate spending declined 35% YoY after recent RBI guidelines. Retail spending, however, grew 25% YoY. Asset quality remained under pressure, with GNPA/NNPA ratios increasing 12bp/2bp QoQ to 2.76%/0.99%. The drop in corporate spending led to a decline in overall opex, and as a result RoA/RoE improved to 4.7%/22.2%.

Outlook

We further cut our FY25E/FY26E EPS by 7%/8%, factoring in sharp margin pressure and elevated credit costs. We maintain Neutral with a TP of INR850 (premised on 20x FY26E EPS).