Top Brokerage Firms Places Buy On SBI Group's 2 Large Cap Stocks, Sees Upto 27% Gains; Know More

Two leading brokerage firms KR Choksey and HDFC securities have picked two large-cap stocks of the SBI group with a Buy recommendation in August. KR Choksey has placed a buy on SBI Life Insurance Company (SILIFE), while HDFC Securities has placed a Buy on SBI Cards & Payments Services (SBI Cards). The brokerage firm sees 27% Upside potential in the share price, considering the given target price. Read below to know more:

1. SBI Life Insurance Company (SILIFE)

According to KR Choksey, SBILIFE's Q1FY24 performance reported subdued growth with lower APE and a decline in VNB, which was led by the high base effect of last year. The Non-Parmix for the quarter reported a decline that impacted the VNB margins, while the low yielding product mix reported higher traction, especially ULIP. Positive trends in the capital market drove the growth of ULIP; thus, the segment continued to dominate the overall mix. On the protection front, SBILIFE continued to see sequential improvement in the retail protection segment. However, the management has maintained its guidance of delivering 20-25% business growth in FY24E on the back of healthy demand and improving penetration owing to regulatory changes with VNB margins to berange bound at 28-30% for FY24E. The current valuation continued to be relatively attractive compared to its peers.

The brokerage said, "We expect the GWP to grow at 16.4% CAGR over FY23-25E with a VNB growth of 12.7% CAGR. PAT is expected to grow at 11.5% CAGR over FY23-25E, maintaining its cost leadership. Persistency ratio will continue to see healthy improvement in coming quarter. We remain watchful on the growth trend on account of budgetary, regulatory changes and underlying shift in the product mix."

It added, "We continue to apply a 2.5x P/EV on FY25E EVPS of INR 652.1 and a VNB multiple of 15.2x to arrive at a weighted average TP of INR 1,630 per share (unchanged) for SBI Life (50:50 weights on the P-EV and appraisal value methodology ); implying a potential upside of 27.3% from the CMP. Accordingly, we maintain our rating as "BUY" on the shares of SBILIFE."

Stock Movement

Given the target price of Rs 1630/share by the KR Choksey, if you buy the stock at the current market it can fetch 27% strong gains. The stock's current market price on BSE is Rs 1279.10/share, up 0.17% from its previous close. Its 52-week high is Rs 1339.55/share and its 52-week low is Rs 1039.25/share on BSE. The stock has fallen 1.65% in 1 week, and 2.13% in 1 month, respectively. It declined 2.64% in 1 year, while in 2 and 3 years, it gained 16.31% and 40.15%, respectively. It gained 83.82% in 5 years.

2. SBI Cards & Payments Services (SBI Cards)

According to HDFC Securities, SBI Cards' (SBICARD) earnings were again marred by higher-than-expected provisions, while other key metrics exhibited healthy performance. The mix of revolving loans (~24%) seems to have bottomed out, with instalment (EMI) loans supporting NIMs (11.5%) despite a rise in funding costs. Business momentum was healthy in terms of new card acquisitions (+22% YoY) as well as retail per-card spending (+7% YoY). Asset quality deteriorated further with credit costs at 6.8%, largely stemming from the CY19 cohort (~16% of receivables), further delaying the path to steady-state credit costs. SBICARD continues to diversify its customer (self-employed) and geographic (Tier III/IV cities) profile and is searching for the right balance of risk-reward.

"We trim our FY24/FY25 earnings estimates to factor in higher credit costs and maintain BUY with a revised RI-based TP of INR 955 (implying 25x FY25 EPS). We are bullish on the overall credit card space and SBICARD's ability to deliver superior profitability (5%+ RoA, 25%+ RoE)," the brokerage has said.

Stock Movement

Stock Movement According to the given target price of Rs 955/share, if you buy the stock at the current market it can fetch up to 9% returns. The stock last traded at Rs 881.30/share, up 3.11% from its previous close. Its 52-week-high is Rs 1028.75/share and its 52-week-low is Rs 690.90/share on BSE. It surged 0.54% in 1 week, and 4.06% in 1 month. It has fallen 6.62% in 1 year, and 14.97% in 2 years, respectively. It gained 21.35% in 3 years.

Disclaimer - The stocks have been picked from the brokerage reports of KR Choksey & HDFC Securities. 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.