Buy SBI Cards and Payment Services; target of Rs 960: Motilal Oswal

Motilal Oswal's research report on SBI Cards and Payment Services

SBICARD reported a weak quarter as higher provisions dragged down net earnings and PPoP came in slightly below our estimate. PAT grew 32% YoY to INR5.1b (13% miss). Margins declined 70bp QoQ to 11.6% in 3QFY23 due to a lower revolver mix (24%) and a higher cost of funds. Growth in spends was healthy at 11% QoQ, with corporate spends up 25% and retail spends up 7% QoQ. GNPA/NNPA ratios increased by 8bp/2bp QoQ to 2.22%/0.8%. PCR was stable at ~64%. RoA/RoE came in at 4.8%/22.0%.

Outlook

We cut our estimates by 5-7% to factor in lower NII and slightly higher provisions. We estimate SBICARD to deliver a 34% earnings CAGR over FY23– 25, leading to RoA/RoE of 6.5%/27.9%. Maintain Buy with a TP of INR960.