Prabhudas Lilladher is bullish on State Bank of India has recommended buy rating on the stock with a target price of Rs 350 in its research report dated February 09, 2018.
Prabhudas Lilladher's research report on State Bank of India
SBI’s earnings disappointed with losses of Rs24.2bn on the back of twin impacts of rising bond yields and provisions due to high divergence on NPA with RBI. This led to fresh slippages of Rs258.4bn (1.25% of loans). High slippages also impacted top line growth with NII growing only 5% YoY (flattish QoQ) but margins saw marginal uptick sequentially. Also, Tier ‐ I got impacted by ~55 ‐ 60bps QoQ as Bank had to reverse the effect of revaluation on certain leased assets impacting reserves and Tier ‐ I by Rs112.1bn along with P&L losses. We believe, provision will remain high for ageing and remainder of NCLT referrals but as management guided on lowering slippage rate & consequently credit cost in FY19 will help lift earnings. We believe critical Tier ‐ I would not be an issue on ability to raise capital.
Retain BUY with revised TP of Rs350 (from Rs386) based on 1.6x Sep ‐ 19 ABV & SOTP.
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