Buy State Bank of India; target of Rs 907: LKP Research

LKP Research's research report on State Bank of India

State Bank of India (SBI) delivered a decent quarterly performance, supported by a robust broad-based loan growth and improved asset quality. While operating profit remained strong, earnings were impacted by elevated provisioning. The bank’s NIM moderated on higher cost of deposits and is expected to remain range bound in the near term as deposit rates are expected to remain sticky despite recent repo rate cut. However, the impact of rate cut on margins is expected to be minimal due to its lower share of repo linked loans. Further, the bank’s asset quality continues to remain strong, in a challenging macro environment with effective collection efficiency and robust underwriting. With its continued focus on digital transformation, strategic provisioning buffers, and healthy capital levels, SBI is wellpositioned to capitalize on improving macro conditions.

Outlook

Hence, we reiterate our BUY rating on the stock with a Sum-of-the-Parts (SOTP)-based target price of ₹907.