Buy State Bank of India; target of Rs 680: Emkay Global Financial

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26 Aug, 2025 12:21

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Emkay Global Financial's report on State Bank of India

SBI has promised above-systemic credit growth of ~9.5-10% in FY22E. It also expects +100bps above nominal GDP growth in FY23E. We have slightly trimmed our FY23 credit growth estimate for SBI by 100bps to ~12.7% from 13.7%, factoring in some moderation in GDP growth amid the Russia-Ukraine conflict, but expect the growth to improve to ~15%/16% by FY24E/25E. SBI should benefit on the margin front in a rising rate cycle, given its continued cost advantage, higher retail orientation (including better-yielding Xpress Credit), and most importantly, better LDR (domestic at 65%-70% vs. current 61%). As per management, the visible pick-up seen in corporate activity, transactional banking and retracement of retail fees (including waivers/discounts) should lead to overall better fee growth as well, partly blunting the impact of rising G-sec yields (protected till 7%) on its treasury performance. Taking better NII/fee growth into account, we expect FY22-24E core-profit CAGR of 20%, in line with private peers.

Outlook

After the recent market correction due to the Russia-Ukraine conflict, SBI is trading at attractive valuations of 0.9x Mar’24E P/ABV. SBI has come a long way and is now far better placed in terms of capital, asset quality and earnings as demonstrated during the Covid peak. In our view, the bank’s higher retail orientation and steady improvement in risk-adjusted returns (RoRWA) call for a sustained re-rating. Thus, maintain Buy/OW in EAP, with a TP of Rs680 (now at 1.5x Mar’24E core ABV + subs/Inv valuation of Rs211).

More Info

At 13:43 hrs State Bank of India was quoting at Rs 488.70, down Rs 1.95, or 0.40 percent.

It has touched an intraday high of Rs 494.70 and an intraday low of Rs 483.85.

It was trading with volumes of 617,870 shares, compared to its thirty day average of 1,332,414 shares, a decrease of -53.63 percent.

In the previous trading session, the share closed down 0.66 percent or Rs 3.25 at Rs 490.65.

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 10.99 percent below its 52-week high and 52.17 percent above its 52-week low.

Market capitalisation stands at Rs 436,145.77 crore.

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