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SBI stock may rally another 40% after hitting record high: Analysts

Topics sbi | Markets | Q3 results

At the bourses, the stock is around 4 per cent off its record high of Rs 408, touched on February 5
When State bank of India (SBI), with nearly 20-25 per cent market share, records a beat on its quarterly earnings, especially amid a global pandemic, the feat is sure to invite re-rating from analysts. 

The series of price-target upgrades continued for the sixth consecutive quarter for the state-owned lender as it reported a 7 per cent decline in net profit at Rs 5,196 crore for quarter ended December 2020. That compares with the Rs 4,479-crore consensus estimate of analysts tracked by Bloomberg.

On the asset quality front, SBI’s gross non-performing asset ratio stood at 4.77 per cent compared with 5.28 per cent in the preceding three months. Moreover, its net NPA ratio was at 1.23 per cent, down 36 basis points sequentially. Analysts had expected GNPAs to rise to over 6 per cent.

Such a healthy performance, analysts say, should help the bank reach 10 per cent return in equity (RoEs) over the next 2 years.
“Given the stable asset quality and the additional buffers created, we lower credit costs by 20bps for FY22/23e to 1.6 per cent and 1.4 per cent, respectively. The core operating profit in our view will remain in the 1.5-1.7 per cent range and higher capital gains from stake sales in subsidiaries should protect overall profitability,” said analyst at Investec in a post-result report.

On the back of a nearly 22 per cent upgrade to FY22e PAT and a 7 per cent upgrade to book value of equity per share (BVPS) post the results, the brokerage has increased its valuations multiple to 1.0x (from 0.7x) and value of subsidiaries in SOTP to Rs 115 (from Rs 90) leading to revised target price of Rs 430 (from Rs270).

At the bourses, the stock is around 4 per cent off its record high of Rs 408, touched on February 5, 2021. So far in the calendar year 2021, the stock has soared 42.6 per cent on the BSE, as against a 10 per cent in the benchmark S&P BSE Sensex.

Here’re the latest price targets on the stock by various brokerages:
Brokerage 1-yr target price (in Rs) Upside (in %)
Investec 430 9.6
JPMorgan 440 12.2
Macquarie 450 14.7
Credit Suisse 460 17.3
UBS 430 9.6
CLSA  560 42.8
Jefferies 480 22.4
Morgan Stanley 350 -10.7
Prabhudas Lilladher 445 13.5
Emkay Global 460 17.3
YES Securities 440 12.2
Motilal Oswal Financial Services 475 21.1
Source: Respective research reports  
Note: Upside against BSE closing price as on Feb 10, 2021  

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