State Bank of India (SBI) is an attractive play on a gradual recovery in Indian economy, with a healthy PCR (88% including Technical Write Off), robust Tier 1 capital ratio of ~11.9% and a strong liability franchise. Manageable asset quality outlook with a 97% collection efficiency, guidance of just Rs. 60,000 crore for FY2021 slippages and restructuring (~2.5% of gross advances), and only ~Rs 2,000 crore of provisions remaining provide comfort. Stock trades at 1.2x / 1.0x its FY2022E / FY2023E ABVPS which is reasonable; while we maintain cautious stance on PSU banks, we find that SBI is best-placed with strong fundamentals.
OutlookWe maintain a Buy rating on the stock with a revised SOTP-based PT of Rs. 320.
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