Buy SBI Cards; target of Rs 970 : Motilal Oswal

Motilal Oswal's research report on SBI Cards

SBI Cards (SBICARD) reported an in-line quarter with 1QFY24 PAT at INR5.9b. PPoP grew 17% YoY (5% beat); however, elevated provisions due to stress in CY19 sourcing vintage dragged earnings. Margin stood broadly stable at 11.5% supported by slight increase in mix of EMI loans while revolver mix was stable. Growth in spends was healthy with retail spends up 28% YoY while corporate spends rose 10% YoY in 1QFY24. GNPA/NNPA ratios expanded 6bp/2bp QoQ to 2.41%/0.89%. PCR was stable at ~64%. RoA/RoE stood at 5.1%/23.3% during the quarter.

Outlook

We estimate SBICARD to deliver 28% earnings CAGR over FY23–25, leading to an RoA/RoE of 5.5%/26.4%. Reiterate BUY with a TP of INR970.