Basic radar: Good news for SBI shareholders. This brokerage firm is seeing new records in 1 year | Rare Techy
The public sector bank hit a new record high of Rs 586 on October 25. It has increased by almost 2% in a week and by 8% in a month.
SBI is one of the strongest stocks in the banking space and is expected to report strong results for the quarter ended September this week on November 5.
The stock comes at reasonable valuations, and long-term investors looking to add to the banking stock can look at SBI for a target above Rs 600 in the next 12 months, experts suggest.
SBI has shown a strong improvement in asset quality over the past few months. New slippages have decreased by 1%, against peers, while the Promotion Coverage Rate (PCR) has increased to 75%.
When to buy? SBI is available at reasonable valuations ahead of Q2, says Sneha Poddar
“SBI comes at a reasonable valuation of 1.4x FY24 Adj P/B with a view to growing at a ~30% CAGR in earnings over FY22-24. Currently, we have a target of Rs 625 which is likely to rebound changed.” Sneha Poddar, AVP, Fundamental Research, Motilal Oswal Financial Services, said.
Better PCR, coupled with controlled restructuring and reduced Special Accounts (SMA) book will result in a reduction in cost of credit by 0.8% for SBI which is our top pick,” said Sneha, AVP, Fundamental Research. .
“We have already seen strong numbers from many major banks and expect SBI to report strong numbers on November 5. In Q2FY23, we expect SBI to report a healthy 19% YoY loan growth, with margins improving by ~3.1%,” she said.
Strong sales growth with a pick-up in the SME/Corporate book will support loan growth. Stable margin, liquidity deployment, and recovery in rate cycle as ~75% of loans are liquid in nature, will drive net interest income (NII) recovery, it added.
“SBI has one of the best liability franchises with a CASA mix of ~45%, which puts it in a better position to leverage the cost of finance in a rate regime,” highlighted Poddar.
It added that SBI is available at a reasonable valuation of 1.4x FY24 Adj P/B with the view of incremental growth of ~30% earnings CAGR over FY22-24.
“Currently, we have a target of Rs 625 which is likely to be subject to revision,” it suggests.
(Disclaimer: Suggestions, recommendations, views and opinions are the experts’ own. These views do not represent the Economic Times)