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Subscribe to SBI Cards: ICICI Direct

ICICI Direct has come out with its report on SBI Cards. The research firm has recommended to "Subscribe'' the IPO in its research report as on February 27, 2020

February 28, 2020 / 12:46 PM IST
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ICICI Direct's IPO report on SBI Cards

SBI Cards (SBIC), a subsidiary of State Bank of India, is the second largest credit card issuer with 93.2 lakh outstanding credit cards and ~ Rs 98486 crore in terms of total credit card spends as on December 2019, entailing into a market share of 18.1% and 17.9% respectively. Diversified customer acquisition network and large product suite (largest number of co-branding partnership) enables better customer engagement across multiple channels. SBIC has maintained a strong earnings trajectory with revenue growth at 44.6% CAGR to ~Rs 6999 crore in 2017 and net profit trajectory at 52.1% CAGR to ~Rs 862.7 crore in 2019 with sustainable RoA >4% and RoE~28%.

Valuation and Outlook

SBIC offers investment opportunity in unique business model with strong profitability. Sustainability of higher business growth and strong return ratios (sustained RoA >4% & RoE~28%) justifies premium valuation for the business. Therefore, we recommend a SUBSCRIBE recommendation on the stock. At higher end of the price band of Rs 755, the stock is available at a P/E of ~46x (annualised on post issue basis) and P/BV of ~13.5x (post issue).

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