This PSU Banking Stock Set To Rally, ICICI Direct Retains Buy With Rs 750 Target Price

Leading brokerage firm ICICI Direct in its PSU Bank - Thematic report published on December 22, 2022, has placed a buy call on the stock of State Bank Of India with a revised target price of Rs 750/share. According to the given target price, the stock is likely to surge up to 27% from its current level.

SBI is a public sector bank and also the largest bank in India with a balance sheet size of over ~ Rs 52 lakh crore. Strength in retail portfolios, best-operating metrics in the PSU banking space. Large subsidiaries, strong outlook adding value to the bank. It has a market capitalisation of Rs 5,29,586 crore. It is a large-cap banking company.

Stock Outlook & Returns

On NSE, the current market price (CMP) of stock is Rs 593.40/share. According to information available on NSE, the stock recorded its 52-week high level on 15 December 2022 at Rs 629.55 and the 52 week low on 8 March 2022 at Rs 425, respectively.

 It moved down 3.66% in a week, whereas it moved up 4.6% in 3 months. The stock has given 20.17% positive returns in the past 1 year, and 75.64% in the past 3 years, respectively. It has given a maximum 85.52% positive returns in the past 5 years. 

Highlights

SBI has been witnessing a sustained recovery. 

• Sustained elevated credit growth (20.8% YoY in Q2FY23) seen after FY14, with market share broadly steady at ~22.5%.
• NIM at a decadal high at 3.5%, supported by robust liabilities franchise with steady market share at ~23.8%.
• After touching a peak at 10.9% in FY18, asset quality concerns are receding with GNPA at 3.5% in Q2FY23. R/s book is steady at 1% with PCR at ~78%.
• Robust capital position with capital adequacy ratio (CaR) at 13.5% and Tier I ratio at 11.1%.

ICICI Direct Recommends Buy For Rs 750/share Target price

SBI, after getting impacted by corporate NPAs, has reported a consistent improvement in business growth as well asset quality. Accelerated growth, steady margins and lower credit cost are expected to drive RoA further. Thus the stock, long due for re-rating, should see strong positive momentum. "Hence, we retain our BUY rating on the stock. We value the bank at ~1.25x FY25E ABV and subsidiaries at ~Rs 183/share to arrive at a revised target price of Rs 750 from Rs 700 earlier," the brokerage has said.

Key triggers for future price performance

Credit growth guidance of ~14-16% to be driven by steady margins, healthy deposit franchise and strong demand pipeline, which will also aid business growth and overall performance. Steady NIMs with adequate provision buffer to aid healthy earning momentum ahead. Thus, improving RoE trajectory to aid improvement in valuations. Continued traction in customer & business accretion via "Yono". Unlocking of subsidiaries value to act as positive surprise.

Disclaimer

The stock has been picked from the brokerage report of ICICI Direct. Greynium Information Technologies, the Author, and the respective Brokerage house are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to consult with certified experts before making any investment decision.