SBI Shares Can Gain 49%, Says Motilal Oswal Report

Broking firm, Motilal Oswal Institutional Equities has set a price target of Rs 285 on the stock of State Bank of India, implying a potential upside of 49 per cent from current levels of Rs 191.

"SBI reported strong operating performance in a challenging environment. Deposit growth stood strong and aggressive cut in SA/TD rates enabled margin improvement unlike the decline for many other private banks. Slippages were lower, helped by the RBI's dispensation, which resulted in an improvement in asset quality ratios. We believe that SBI has prudently improved PCR over the last few years and has one of the lowest stressed assets amongst corporate banks," the brokerage firm has stated.

It expects recovery of Rs 100 billion to Rs 120 billion from large accounts' resolution (steel and few power accounts) by Dec'20.

According to Motilal Oswal Institutional Equities, the proportion of moratorium book has improved further to 9.5% of terms loans (v/s 23% earlier). Further, the moratorium proportion is the lowest versus peers.

"We, thus, upgrade our earnings estimate for FY21/FY22E by 8%/9% as we factor in higher NII growth. However, credit cost trends should remain high for FY21E, and thus, we estimate RoA/RoE of 0.5%/9.6% by FY22E. Maintain Buy with a target price of Rs 285 (0.8x FY22E ABV for the bank)," the brokerage firm has stated.