SBI Cards and Payment Services witnessed selling pressure on Friday after reporting its second quarter average numbers for FY13. Overall, on that day, SBI Cards shares fell around 7%, however, corrected to end a little over 5% on both BSE and NSE. Margins and revolve rates of the SBI-backed pure-play credit card company are under pressure. But that hasn’t stopped analysts from recommending a ‘buy’ with a four-digit target price. However, some experts cut the target price on SBI Cards, but let’s see it above or around 1,000 points.
on BSE, State Bank Of India leaves store on off below 810.95 46.65 or 5.44%. The market cap of the stock is 76,500.11 crores. Stock touched intraday high and low 839 each and 800 per respectively.
Meanwhile, shares closed on NSE less than 811.50 46.65 or 5.44%. During trading hours, stocks also wiped out their shares. 800 points on this exchange and fell to the day’s low 799.90 each. Here, the stock remained intraday high 837.95 each.
On Thursday, SBI Cards reported a 52% increase in net profit 526 cr in Q2FY23 as compared to 345 crore in the second quarter of FY22. During the second quarter, interest income increased 311 cr to 1,484 crore vs. 1,173 crore in Q2FY22. total income was 3,453 crore for Q2 FY23 2,696 crore for Q2 FY22.
Other key highlights of Q2 were – new accounts volume grew 36% yoy to 1,295k, while cards-in-force grew 18% yoy to 1.48 cr. 43 percent increase in spending year on year 62,306 crore, while receivables grew by 41% 37,730 crores. Gross NPAs stood at 2.14% in Q2FY23 versus 3.36% in Q2FY22, while Net NPAs in the second quarter of the current fiscal stood at 0.78%, as against 0.91% in Q2FY22.
As of September 30, 2022, the company had a market share of 19.1% in cards-in-force, whereas, the share of spend was 18%.
What do analysts say about SBI Cards Share Price?
In a report, Akshay Ashok Analyst, Prabhudas Lilladher said, “The management has maintained that the share of corporate spending will improve to a historic extent but in a recalculated manner.”
Going forward, Ashok’s note said, “We believe credit cost pressures are expected to ease (from the current 5.6%) to 4-4.5% recovery followed by an improvement in the festive season. Operating expenses are expected to rise along with rising sourcing costs with increasing competition (200-300 bps growth in cost-earnings by 60% from FY 2012-24).”
Analysts expect strong fee traction (20% CAGR between FY22-24) due to increase in retail spending on the back of festive season.
In addition, the analyst’s note noted that improving asset quality trends lead to lower credit costs, thereby offsetting rising cost pressures, especially due to competition and regulatory hurdles.
On valuation, Lal’s note said, “After incorporating the above thesis our FY23 and FY24 EPS estimates are below 7.5% and 6.2% respectively. We maintain ‘ACUMULATE’ rating on the stock as SBICARD has a high return profile (5.4 %). % + RoA / 24). %RoE) with 39% EPS CAGR in FY 22-24. 34x PE Our valuation multiplier on Sep’24E becomes TP of Rs 1,013 from earlier target price of Rs 1,087 “
Further, Nitin Agarwal and Yash Agarwal Research Analysts at Motilal Oswal said in their report, “SBICARD reported a modest quarter with net income impacted due to higher provisions. Margin QoQ fell as revolver mix declined to 24% , which is accompanied by rising funding costs.”
In the note, the duo further said, “We expect the revolver mix to grow gradually as spending matures in the festive season, while margins may remain under pressure due to rising borrowing costs. Spending growth remains strong and Is likely to remain healthy, thus aiding credit growth. Moderation in ECL will keep credit cost in check. We expect 41% PAT CAGR in FY 2012-24, resulting in an ROA of 6.5% / 28.2% We maintain our Buy Rating with TP 1,000 (based on 29x FY24E EPS).”
Disclaimer: The views and recommendations given above are those of individual analysts or broking companies and not of Mint.
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