Hold SBI Cards; target of Rs 865: Emkay Global Financial

Emkay Global Financial's research report on SBI Cards

SBI Cards (SBIC) reported in-line, albeit relatively moderate, PAT at Rs6bn/ROA at 4.9%, as asset quality continues to hurt, leading to elevated write-offs. Company indicates that it is keeping close track of its portfolio, while taking corrective measures to limit incremental stress. SBIC lost some market share in CIF/spends at 19.2%/17.9% in 1H from 19.7%/18.2% as of FY23, possibly due to devaluation of the high-selling cashback card. Gross receivables growth too was modest, at 20% YoY, due to moderation in spends as well as some base effect due to the festive season occurring in 2Q last year. Share of the revolver book remains low at 24% which, coupled with rising CoF, weighed on NIMs—down by 12bps QoQ to 11.3%.

Outlook

Factoring-in the operational softness in business/fees and higher LLP due to rising stress, we have lowered our FY24- 26E earnings by 11-13% and our RoA/RoE expectations to ~4.7-4.9%/23%. Based on our ERE model, we have revised down our TP to Rs865/share (from Rs950), implying 5.2x its Sep-25 ABV/25x EPS. We retain HOLD on the stock.

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