Accumulate SBI Cards and Payment Services; target of Rs 895: Prabhudas Lilladher
Prabhudas Lilladher recommended accumulate rating on SBI Cards and Payment Services with a target price of Rs 895 in its research report dated October 23, 2020.
October 23, 2020 / 02:25 PM IST
Prabhudas Lilladher's research report on SBI Cards and Payment Services
We downgrade SBICARD to Accumulate (earlier BUY) and pare down our EPS estimates by 36% for FY21 and 5-7% for FY22-23. Our downgrade stems from our conservative stance on credit costs (12%) and NPA (~8%) for FY21 led by pandemic challenges. While we assess 10% of book net of provisions stands under stress as at Sep’20-end, provision run-rate to stay elevated for H2FY21 (avg. Rs8bn). Said that, Q2FY21 witnessed outstanding cards traction (~4% QoQ growth vs negative in Q1FY21) and improved spends (55% QoQ growth) buoyed by retail spends (90% pre-COIVD levels). Such a business rebound coupled with healthy PPoP (13%QoQ/27%YoY) should absorb asset quality pressures over the course of the year.
The recent buoyant stock momentum and near term erratic asset quality picture prompts us to trim our valuation multiple to 44.5x (earlier 47x) on Sep’22 PE basis for a price target of Rs 895. Said that, long term prospects remain upbeat with industry-best return profile (4.6% RoA/22% RoE over FY22-23E). recommend ACCUMULATE.
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