The leading PSB lender State Bank of India in its Q4FY20 results released on Friday posted a profit at Rs. 3580 crore, which is a nearly four fold jump in consolidated net profit. This was however on account of share sale in SBI Cards.
This was lower than the analysts estimates and was primarily due to higher loan loss provisions, employee related cost as well as slower NIM. Also, there was a decline in NII of 0.8% year on year as there was interest reversal on agri slippages.
Post the quarterly numbers, most of the brokerages cut their target price for the stock but still see an up to 80% upside with a 'Buy' rating. The stock on May 22 struck its 52-week low price of Rs. 149.55 per share on the BSE. But improvement in asset quality as well as cheap valuations asserted the brokerage houses to maintain this buy call on the counter of SBI.
Calls on the stock by different brokerages and their rationale
Even after yesterday's jump of 5% in the stock, the stock is still 47% away from its 52-week high price and brokerage firm Ambit Capital has set a target price of Rs. 336 per share for the stock, which is a 78% upside from the current levels. "Strong position on liquidity with a high retail deposit base should enable the bank to navigate the current situation and maint NIMs. Further subsidiary valuations being nearly 53% of current capital base enables bank to increase capital adequacy by selling a stake in subsidiaries without diluting at current valuations", the brokerage said.
The brokerage also cut the bank's target price from Rs. 420 to Rs. 340 per share and the Covid 19 crisis can be well sailed through. And the bank's weak operating performance shall be offset by the improvement in the bank's asset quality. Lower slippages resulted in the decline in GNPA to Rs. 149091.85 crore.
For the counter, the stock sees a target price of Rs. 270 and in its latest report said, "The moratorium percentage is unusually low (vs. peers) and the related disclosures were ambiguous. Further, COVID-19 related provisions (Rs 9.4bn) appear low, in context of those made by peers as well as SBI's asset quality track record". "The term of SBI's current chairman is set to end in Oct-20, this creates additional uncertainty," it added.
Also at the same time, in accordance with the adherence to the RBI's restriction in announcing the dividend payout, for the March ended quarter, the bank has not delivered any dividend.
The brokerage sets a 47% upside for the stock with a buy recommendation and said "The proportion of the moratorium book also stands lower than most peers, aided by higher exposure to salaried (government and PSU) employees. This would enable it to maintain strong control over credit cost as the impact of COVID-19 becomes visible in 2HFY21". "We cut our estimates for FY21/FY22 by 17%/16% as we build-in a slight moderation in margins/fee income and higher credit cost," it added.
From the earlier target price of Rs. 350, the brokerage firm slashed it to Rs. 260. Also at the same time said that outlook is weak and valuations inexpensive.