Buy State Bank of India; target of Rs 350: Centrum

Centrum's research report on State Bank of India

We retain Buy on State Bank of India (SBIN) with revised SOTP-based TP at Rs350. Q1FY19 results saw several hits – healthy NII, improved margins, strong core operating profit and lower slippages; and few misses – feeble other income growth, elevated provisions and thus yet another quarter of losses. Watchlist portfolio stands reduced to 1.24%; management has reiterated its stance on moderation in slippages / credit cost for FY19E. Focus shifts towards recoveries and balance sheet growth. Capital position remains strong, subsidiaries profitable. Valuations continue to remain attractive. Retain BUY.

Outlook

We have tweaked our estimates on margin / other income front. Focus shifts to asset recovery and balance sheet growth. We continue to like SBIN for its improved operational performance and contained asset quality. Retain Buy, with revised SOTP-based TP at Rs350 (vs. Rs330 earlier). Key risks: Lower than expected loan growth / slow pace of recoveries.