Buy SBI; target of Rs 315: Khambatta Securities

Khambatta Securitie's research report on SBI

During the quarter, bank gained market share in both deposits and advances. Bank’s market share in domestic deposits grew by 32 bps y-o-y to 17.53%. Healthy retail deposits and advances protected deposits and advances growth. During the quarter, deposits grew by 13.7% to Rs 18,590 bn aided by saving bank deposits. During the quarter, saving deposits grew by 16.64% y-o-y while Current account deposits remained in-line with the deposits growth to 12.6%. During the quarter, advances grew by 7.2% y-o-y to Rs 14,336 bn aided by retail and corporate loans. During the quarter, retail loans grew by 20.4% y-o-y to Rs 3,504 bn driven by Auto and home loan. During the quarter, Home loan and Auto loan grew by 20.3% and 20.9% y-o-y to Rs 2,057 bn and Rs 412 bn respectively. We expect retail & CAG in advances and CASA in deposits will lead the growth.

At CMP stock is available at 2.2x FY17E standalone adj. BV (ABV) of Rs 125 per share and 1.9x FY18E standalone ABV of Rs 140 per share. Adjusting the subsidiary companies valuation of Rs 64 per share, the stock is trading at 1.4x FY17E ABV and 1.3x FY18E ABV. Our valuation is based on sum-of-the-parts methodology. The valuation of SBI standalone is Rs 252 per share, based on 1.8x FY18E standalone ABV of Rs 140 per share on account of cleaning balance sheet, improving NIM and marginal spike in advances and the valuation of subsidiary companies is Rs 64/share. Consequently, we arrive at target price of Rs 315/share, representing 15% upside.