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    Fundamental Radar: Good news for SBI shareholders. This brokerage firm sees fresh record highs in 1 year

    Synopsis

    Improved PCR, coupled with controlled restructuring and low Special Mention Accounts (SMA) book will drive a sustained reduction in credit cost to 0.8% for SBI which is our top pick,” Sneha Poddar, AVP, Fundamental Research, Motilal Oswal Financial Services, said.

    Fundamental Radar: Good news for SBI shareholders. This brokerage firm sees fresh record highs in 1 yearGetty Images
    State Bank of India (SBI), the largest Indian Bank with one-fourth market share, hit a fresh record high in the run-up to its results on November 5 this week, but the rally may not be over yet, suggest experts.

    The public sector bank hit a fresh record high of Rs 586 on 25 October. It has rallied nearly 2% in a week, and over 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 5 November.

    The stock is available at reasonable valuations, and long-term investors who are looking to add banking stocks can look at SBI for a target above Rs 600 in the next 12 months, suggest experts.

    SBI has demonstrated strong improvement in asset quality over the past few quarters. Fresh slippages have moderated to a low of 1%, beating private peers, while the Provisioning Coverage Ratio (PCR) has improved to 75%.

    Time to buy? SBI available at reasonable valuations ahead of Q2, says Sneha Poddar

    "SBI is available at a reasonable valuation of 1.4x FY24 Adj P/B with high growth visibility of ~30% earnings CAGR over FY22-24. Currently, we have a target of Rs625 which is likely to get revised post its results," Sneha Poddar, AVP, Fundamental Research, Motilal Oswal Financial Services, said.

    Improved PCR, coupled with controlled restructuring and low Special Mention Accounts (SMA) book will drive a sustained reduction in credit cost to 0.8% for SBI which is our top pick,” Sneha Poddar, AVP, Fundamental Research, Motilal Oswal Financial Services, said.

    “We have already seen strong numbers from various large banks and expect SBI to report robust numbers on November 5th. In Q2FY23, we expect SBI to report healthy 19% YoY loan growth, with margins improving to ~3.1%,” she said.

    Strong retail growth along with a pick-up in the SME/Corporate book will support the loan growth. Stable margin, deployment of liquidity, and reversal in the rate cycle as ~75% of loans are floating in nature, will enable recovery in the net interest income (NII), she added.

    “SBI has one of the best liability franchises with CASA mix of ~45%, which puts it in a better position to manage funding cost in a rising rate regime,” highlighted Poddar.

    She further added that SBI is available at a reasonable valuation of 1.4x FY24 Adj P/B with high growth visibility of ~30% earnings CAGR over FY22-24.

    “Currently, we have a target of Rs 625 which is likely to get revised post its results," she recommends.

    (Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)



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    (What's moving Sensex and Nifty Track latest market news, stock tips and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .)

    Download The Economic Times News App to get Daily Market Updates & Live Business News.

    Subscribe to The Economic Times Prime and read the Economic Times ePaper Online.and Sensex Today.

    Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price

    ...more
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