Buy State Bank of India; target of Rs 595: Choice Equity Broking

"India’s specialty chemicals industry is a decadal growth opportunity and it is still not too late to participate in the value creation process. We prefer CRAMS/CSM players Navin Fluorine (Navin) and PI Industries (PI) as they provide long-term earnings visibility. We also like UPL due to robust growth outlook and reducing debt concerns and SRF due to rising contribution from the chemicals business," JM Financial research report.

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Choice Equity Broking's report on State Bank of India

State Bank of India (SBI) reported PAT of Rs84 bn in Q3FY22 which grew by 62.3% YoY thereby continuing its strong profitability trend. Though major support to the bottom line came from the significant decline in the provisioning cost and contained OPEX. NII grew by slower pace of 6.5% YoY (17.0% in Q2FY22) due to low YoA of 7.6% in Q3FY22, while contained CoD helped to maintain NIM at last quarter level of 3.1%. Slippages at Rs23bn (slippages rate improved to 0.4% v/s 0.7% in previous quarter) remained contained and better recovery led 40 bps improvement in the GNPA of 4.5%. Stress appears low with restructuring assets at 120 bps, SMA of 16 bps of loans, while the bank also maintained healthy coverage ratio (PCR) at ~70%, providing comfort on the assets quality front. SBI carries a higher (85%) provisions coverage on corporate NPAs. Mgmt expects similar run rate of slippages rate and credit cost of ~70-80 bps for the next two fiscals.

Outlook

We maintain ‘Buy’ rating on stock with revised target price of Rs595. Standalone banking business is valued at Rs453 derived at P/ABV1.2xFY24E, while subsidiaries are valued at Rs142.

More Info

At 17:30 State Bank of India was quoting at Rs 468.60, up Rs 16.70, or 3.70 percent.

It has touched an intraday high of Rs 476.50 and an intraday low of Rs 461.85.

It was trading with volumes of 2,110,077 shares, compared to its thirty day average of 1,433,370 shares, an increase of 47.21 percent.

In the previous trading session, the share closed up 2.66 percent or Rs 11.70 at Rs 451.90.

The share touched its 52-week high Rs 549.05 and 52-week low Rs 321.15 on 07 February, 2022 and 19 April, 2021, respectively.

Currently, it is trading 14.65 percent below its 52-week high and 45.91 percent above its 52-week low.

Market capitalisation stands at Rs 418,207.30 crore.

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