SBI Share Price: This PSB's Gives All-Time 2,990% Returns; Is There More Room To Buy After Q2FY24?

State Bank of India (SBI) shares traded volatile after Q2FY24 earnings on Monday. The stock price ended in red at Rs 574.40 apiece, down by 0.65% on BSE. Overall, the September 2023 quarter was broadly mixed, however, asset quality continued to improve further. Despite the latest pullback in SBI shares, its all-time returns by a whopping 2,990% on BSE. And there is more room for upside ahead as brokerages recommend buying with a target price ranging from Rs 650 to Rs 800.

During Q2FY24, SBI earned a net profit of Rs 14,330 crore, up by 8.03% from Rs 13,265 crore in Q2FY23. However, sequentially, the profit declined from PAT of Rs 16,884 crore in Q1FY24. Net interest income (NII) came in at Rs 39,500 crore in Q2FY24, rising by 12.27% from Rs 35,183 crore in Q2FY23. NII stood at Rs 38,905 crore in Q1FY24.

Net interest margins (NIM) contracted to 3.43% in the quarter, versus 3.55% in Q2FY23 and 3.47% in Q1FY24. Meanwhile, gross NPA declined to 2.55% in Q2FY24 versus 3.52% in Q2FY23 and 2.76% in Q1FY24. Credit growth at 12.39% YoY with Domestic Advances growing by 13.21% YoY. Also, Whole Bank Deposits grew at 11.91% YoY, out of which CASA Deposit grew by 4.91% YoY. CASA ratio stands at 41.88% as on 30th September 23.

SBI shares have rallied by at least 2,989.83% since mid-1995. In 5 years, SBI shares have given 103% returns.

Brokerages like Motilal Oswal, Prabhudas Lilladher, and JM Financial has suggested buy with target price ranging from Rs 700 to Rs 770 on SBI, while LKP Securities and Religare Broking set TP from Rs 650 to Rs 700.

Talking about the Q2 results, Prabhudas Lilladher in its report said, "PPoP missed PLe by 12.6% due to one-time impact of wage revision that was offset by lower provisions (write-back in other provisions). Hence, core PAT beat PLe by 1.4%. Loan growth for FY24E is guided at 12-14% with retail/SME being key drivers. As per the bank, credit quality in unsecured loans is strong since (1) 82% of customers are working with armed forces or Govt. and (2) the GNPA ratio is low at 0.7%."

PL's report further said, "NIM performance for SBI was superior to peers as a decline in domestic NIM was lesser at 4bps QoQ. Bank sees limited NIM compression in H2FY24 which would be neutralized by better LDR (currently 71.3%)."

On valuation, PL's note added, "On capital, SBI is targeting reach CAR/CET-1 of 15%/11% by FY24 mainly by plough back of profits (no fundraise). We roll forward to Sep'25 ABV but maintain multiple at 1.5x and SOTP-based TP at Rs770. Retain 'BUY'."

JM Financial in its report said, "SBI's core fundamentals continue to be stable while delivery on the growth front along with sustained margins and controlled credit costs should drive rerating of the stock. Mgmt expects CET1 to reach ~11% by Mar'24 (from current levels of 9.9%) driven by strong profitability in FY24E. We value SBIN's core banking business at 1.2x FY25E BVPS to arrive at our SoTP-based target price of INR 710. Maintain BUY."

Meanwhile, Motilal Oswal in its report said, "SBIN delivered a steady quarter, with a beat on profitability aided by lower provisions and steady revenue growth. Opex was high due to high wage provisions, effective Nov'22, hurting PPoP growth. Margins declined 4bp QoQ and the management expects a further 3-5bp compression, though the bank has levers in place (CD ratio, MCLR repricing) to maintain stable margins. Business growth was healthy, with most business segments showing traction (barring corporate portfolio). Asset quality remained robust as the net NPA ratio improved further and the restructured book remained in control at 0.6%, along with a lower SMA pool at 12bp of loans. We estimate SBIN to deliver FY25E RoA/RoE of 1.1%/18.3%. We reiterate our BUY rating with an unchanged TP of INR700 (1.1x FY25E ABV + INR202 from
subs)."

Moreover, LKP Securities said, "Under the base case scenario, we expect the bank to post a ROA/ROE of 1%/15.5% by FY24E led by healthy balance sheet growth along with higher PCR and stable asset quality. We recommend a BUY with a target price of ₹697 (potential upside of 21%). We value the standalone bank with a PBV of 1.2xFY25E Adj. BVPS of ₹459 and value of subsidiaries per share of ₹146."

Furthermore, Religare Broking's research note added, "We remain positive on SBI as the bank is seeing credit growth in line with the industry while the deposit is seeing traction due to retail deposits. While the margin is expected to remain subdued, credit demand will continue to drive growth for the bank. The bank's asset quality continues to improve and its underwriting practices remain strong. We estimate NII/PPOP/PAT to grow at a CAGR of 17.8%/11.9%/13.5% over FY23-25E. We maintain Buy with the target price of Rs 677 valuing the standalone bank at 1.3x of its FY25E Adj. BV."