Buy State Bank of India; target of Rs 427: Prabhudas Lilladher

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26 Aug, 2025 12:21

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Prabhudas Lilladher's research report on State Bank of India

SBI's core performance was better off than expectations on back of higher other income led by continued strong recovery from W.off a/c, decent NII and relatively good opex control. Earnings were dented on back of sharp provision rise based on ageing of certain legacy NPAs in the NCLT List -1 taking PCR to ~100%. Also, asset quality improved on back of lower slippages (Rs79.6bn or 1.6% of loans) v/s expectations and also incorporating few of the recent stress names. Going ahead, higher recoveries & lower slippages should improve asset quality, while better PCR of +60% (70% on corporate book and 93% on NCLT) should translate to normalization in credit cost, helping improve return ratios.

Outlook

We retain BUY with revised TP of Rs427 (from 361) based on 1.5x Mar-21 (rolled over from Sep-20) and Rs88 for subs.

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