Accumulate State Bank of India; target of Rs 351: KR Choksey

KR Choksey's research report on State Bank of India

SBI’s advances grew during the quarter at 13% YoY/7% QoQ. Deposit mobilization was slow with growth of 7.6% YoY/3% QoQ. CASA at 45.7% improved 51 bps sequentially and 6 bps YoY. NII at INR 22,954 Cr. is up 15% YoY/1% QoQ. NIMs (cumulative) stood at 2.78%, expanding by 28 bps YoY/2 bps QoQ. Total Income at INR 35,639 Cr. is up 9.7% YoY/16% QoQ. The bank has provided for INR 16,502 Cr of net provisions during the quarter, down 41% YoY/ up 174% QoQ translating in credit costs of 3.22%, an improvement of 178 bps YoY /down 52 bps QoQ. Asset quality improved with GNPAs at 7.53%, improving by 338 bps YoY / 118 bps QoQ while NNPAs at 3.01% was 272 bps better on sequential basis and 94 bps better annually. PCR stood at 78.7%. PAT at INR 838 Cr. is down 78% QoQ, translating into ROA of 0.09% on account of high provisions the bank had to make in order to finish the year with cleaner books.

Outlook

We apply a P/Adj.BV multiple of 1.33x to the FY21 adj. BVPS of INR 183 and arrive at a target price of INR 351 per share using SOTP approach, an upside of 14.3% over the CMP. Accordingly, we assign an “Accumulate” rating.