Get Annual plan at only Rs 289. Prabhudas Lilladher is bullish on State Bank of India has recommended buy rating on the stock with a target price of Rs 369 in its research report dated August 03, 2019.
Prabhudas Lilladher's research report on State Bank of India
SBI's earnings of Rs23.1bn (PLe: Rs29.4bn) was off from expectations despite lower provisions from non-credit and lower opex which was offset by slower topline growth (base had one-off). Bank saw higher slippages of Rs170.0bn from corporate as well as much elevated in Agri/SME. The Bank SMA-1 & 2 also increased by Rs3.0bn QoQ to Rs10.0bn (0.5% of loans) but importantly bank has exposure to 20 standard a/c of Rs190.0bn or 1.0% of loans (Rs25bn in SMA-2) initiated under the new RBI framework for resolution of stressed assets with 70% formed two major accounts. The incremental stress creates higher potential risk to asset quality and provisions impacting improvement in earnings, while stress from non-corporate also remains high especially Agri/SME.
Outlook
We factor in marginal hits to asset quality & earnings (increase CC to 195bps from 140bps for FY20) with revised TP of Rs369 (from Rs427) and retain BUY with valuations still being reasonable at 1.1x core ABV.
For all recommendations report, click here
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