Moneycontrol PRO
Check Credit Score
Check Credit Score
HomeNewsBusinessStocks

Buy SBI Cards; target of Rs 1000: Emkay Global Financial

Emkay Global Financial is bullish on SBI Cards has recommended buy rating on the stock with a target price of Rs 1000 in its research report dated November 30, 2022.

December 01, 2022 / 12:55 PM IST
 
 
live
  • bselive
  • nselive
Volume
Todays L/H
More

Emkay Global Financial's research report on SBI Cards

Notwithstanding Covid-induced disruptions and rising competitive intensity from alternate payment/credit products, India's CC-base doubled to 74mn in Mar-22 from 37mn in Mar-18, and now stands at a high 79mn (active base). Cumulative-spends (7MFY23) growth is at 58% YoY (albeit on a low base), indicating strong underlying growth currents. We expect overall industry CIF CAGR of 17% and spends to post a near pre-Covid CAGR of 32% in FY22-25E (33% CAGR in FY15-19). SBI Cards [SBIC] is India's 2nd-largest credit-card [CC] issuer, with 19.1% market share of active cards-in-force [CIF] as of Oct-22, and ranks 3rd in terms of spends, with 18% market share. We expect SBIC to log a strong CIF CAGR too, at 18%, and spends CAGR of 30% in FY22-25E, thus largely upholding its market share. Beyond FY25, we expect SBIC to maintain spends-share at ~18%, and clock FY25-35E CC-spends CAGR in the mid-to-high teens. Further, despite the likely continued moderation in interchange fees (ICF), we see RoE staying resilient for SBIC at 25-26% over the cycle, based on >5% RoA (aided by operating leverage) and normalized LLPs (6.2% of loans), with upside risk from higher (>5x) leverage.

Outlook

Nonetheless, our Mar-24 TP of Rs1,000/share, with an upside of 22% (based on the Excess Returns model), assumes a terminal P/B of 2.2x in Mar-35E (6.3x FY25E ABV), consistent with the 20% incremental RoE and 7.5% growth in excess profits. Key downside risks to our TP: continuous erosion in SBIC's spends market-share; regulatory cut in MDR/ICF. Our worst-case scenario (Regulator cutting ICF to 100bps from FY26E and gradual reduction thereafter) yields a Mar-24E FV of Rs690 (implying 16% downside), though we see such a large-cut as unlikely. We initiate coverage on SBIC with a BUY.

For all recommendations report, click here

Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

SBI Cards - 01 -12-2022 - emkay

Broker Research
first published: Dec 1, 2022 12:55 pm

Discover the latest business news, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!

Advisory Alert: It has come to our attention that certain individuals are representing themselves as affiliates of Moneycontrol and soliciting funds on the false promise of assured returns on their investments. We wish to reiterate that Moneycontrol does not solicit funds from investors and neither does it promise any assured returns. In case you are approached by anyone making such claims, please write to us at grievanceofficer@nw18.com or call on 02268882347