Buy This Sensex Bank Stock for 36% Upside Says ICICI Securities
According to the brokerage, the bank reported stellar credit growth and improved asset quality.
- GNPA down 53 bps QoQ to 3.97%, total non-NPA provisions at Rs 30629 crore.
- NII up 15% YoY, NIM stable QoQ at 3.4%, C/I ratio rose to 54%.
- Provisions at Rs 7214 crore down 35% YoY, PAT up 41% YoY at Rs 9114 crore.
- Gross advances up 11% YoY (higher than estimates) and deposits up 10% YoY, CASA at 45.3%.
Key Triggers for future price performance
According to the brokerage, “Strong performance on the asset quality front is a positive. Healthy pipeline to aid business growth and overall performance. Healthy provisions worth around 1.1% provide comfort on earnings shock. Improving RoE trajectory to aid improvement in valuations.”
What should investors do?
The brokerage has said, “SBI’s share price has surged over 2.2x in the past five years. We believe overall strength in lending franchise and liability growth >9% guidance along with a well-provisioned book remain positives. Improving return ratios with RoE touching 12-13% and RoA reaching 0.7-0.8%, offer long term visibility for the stock.”
Target Price and Valuation:
The brokerage has said, “We value the bank at ~1.1x FY24E ABV (from 1.2x) and subsidiaries at ~| 186 per share to arrive at a revised target price of Rs 605 from Rs 650 earlier.” It added, “We maintain our buy rating on the stock.”