Buy SBI; target Rs 350: Kotak Securities

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26 Aug, 2025 12:21

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Kotak Securities' report on State Bank of India (SBI)

Core performance (NII: 9.0% YoY) came in line with our expectations, on back of stable margin (3.12% in 9MFY15) and moderate growth in loan book (~7% YoY). Net profit came marginally lower than our expectations (Rs.29.1 bn; 30.2% YoY) due to elevated loan loss provisions (37.6% YoY) as well high as standard asset provision (89.2% YoY). The addition to impaired assets (gross slippage + new restructuring) came lower at Rs.96.2 bn (3.2% on annualized basis) as against the run rate of Rs.123.4 bn reported during H1FY15.

Stock trades at reasonable valuation (1.3x its FY17E ABV) after stripping the value of its subsidiaries. We believe, SBI being the largest Indian bank with comfortable core capital (tier-I at 10%) would be one of the biggest beneficiaries of likely improvement in the macro-economic environment. We recommend BUY on the stock with upward revised TP of Rs.350 (Rs.310 earlier; rolling over to FY17 estimates) based on SOTP methodology where core business is valued at Rs.237 (1.6x FY17E ABV) and subsidiaries are valued at Rs 113 (post 20% holding company discount). Buy the stock with a target price of Rs 350", says Kotak Securities research report.

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