Centrum's research report on State Bank of India
We retain Buy on State Bank of India (SBIN) with SOTP-based TP unchanged at Rs350. Q2FY19 results were an extension of positive trends witnessed in recent past across key ratios – domestic margins, loan growth, slippages and asset recovery and return ratios. Commentaries across each of the above aspects remain positive (unchanged since last quarter). Watchlist portfolio stands reduced to 1.04% (vs 1.3% as at FY18); management has reiterated its stance on moderation in slippages / credit cost for FY19E. Capital position remains strong, subsidiaries profitable. Valuations at 1.4x FY20E core ABV continue to remain attractive. Retain BUY.
Outlook
We expect bank to report 0.6% RoA/ 10%+ RoE by end-FY20E. We continue to like SBIN for its franchise, improved operational performance and contained asset quality. Retain Buy, with SOTP-based TP at Rs350. Key risks: Margin pressure / slow pace of recoveries could impact earnings.
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