Buy State Bank of India; target of Rs 975: Emkay Global Financial

Emkay Global Financial' research report on State Bank of India

SBI posted a ~6% beat on PAT at Rs192bn/1.1% RoA, led by higher other income (especially treasury gains) and controlled opex, partially offset by higher provisions. Credit growth remained well above the system’s at ~12% YoY, led by healthy growth in the retail and MSME segments, while corporate growth moderated due to higher pre-payments (Rs120bn). The management believes that the healthy pipeline on project financing, coupled with expected acceleration in mortgages in 2H, should support overall credit growth at ~12% with upward bias in FY26E. Margins could correct a bit in 2Q albeit improve in 2H, benefiting from the CRR/deposit rate cut and the recent capital raising with exit NIM at 3%.

Outlook

We largely retain FY26-28E earnings and expect the bank to deliver a healthy RoA of ~1.0-1.1%/RoE of ~15-17%. We maintain BUY with TP at Rs975 (valuing the SA bank at 1.2x Jun-27E ABV/subs at Rs270/sh).