Accumulate SBI Cards and Payment Services; target of Rs 1081: Prabhudas Lilladher

Prabhudas Lilladher's research report on SBI Cards and Payment Services

The October’20 RBI credit card suggests SBICARD maintaining MoM cards-in-force share at ~19% clocking better than industry averages and stood second best to ICICIB and HDFCB wrt cards-in-force and spends traction respectively. As structural demand begins to roll in and shock absorbers (25% CAR, 64% PCR, 6%YoY growth expectation in PPoP for FY21) in place to tackle credit quality, SBICARD geared to return to normalcy sooner than expected with increased spends (25%YoY growth) and fee income (20%YoY growth) for FY22-23E. Such a robust performance places SBICARD as the only NBFC to clock industry best 24-26% RoE and 5-5.7% RoAs over FY22-23E.

Outlook

Such a robust performance coupled with recent stock momentum, we tweak the valuation multiple to 43x P/E (earlier 44.5x) arriving at price target of Rs 1,081 (earlier Rs895). Reiterate ACCUMULATE RATING on the stock.