Neutral SBI Cards; target of Rs 850: Motilal Oswal

Motilal Oswal recommended Neutral rating on SBI Cards with a target price of Rs 850 in its research report dated September 24, 2024.

Broker Research

September 25, 2024 / 11:41 IST

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Motilal Oswal's research report on SBI Cards

SBI Cards (SBICARD) is the second-largest player in the card industry (in terms of CIF) with an 18.5% market share in cards-in-force (CIF) and 15.9% share in total industry spends. The company’s market share in spends has moderated over the past few years, mainly because of the moderation in corporate spends. Meanwhile, growth in retail spends has remained healthy. SBICARD has been reporting high stress in asset quality, which has significantly affected its earnings growth. We estimate an 8% CAGR in earnings over FY23-25 vs. a 50% earnings CAGR over FY21-23. We anticipate credit cost to stay elevated in the near term, due to higher stress in unsecured segments. However, the moderation in funding cost and a gradual improvement in asset quality should boost earnings growth to a 34% CAGR over FY26-27E. The stock has seen significant de-rating over the years and now trades at 4.3x FY26E BV and 21x FY26E EPS, which is in line with few other high-RoE highvaluation NBFCs.

Outlook

We maintain our Neutral rating on the stock with a revised TP of INR850 (23x FY26E EPS).

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