A consensus ‘Buy’, State Bank of India (SBI) beat Reliance Industries to become the most profitable company in the September quarter. A handful of brokerages have upped their FY23/FY24 EPS estimates for the PSU bank by 10-15 per cent. Their price targets for SBI are in the Rs 700-760 range, suggesting more steam left for the largest PSU lender. This is even as the scrip has climbed over 300 per cent since 2020 low of sub Rs 150-odd levels (on a closing basis).
The public sector bank posted its highest ever quarterly net profit at Rs 13,265 crore, up from Rs 7,627 crore in the same quarter of the previous financial year. Its consolidated profit at Rs 14,752 crore in fact beat Reliance Industries’ Q2 profit of Rs 13,656 crore.
YES Securities, which has SBI as it top banking pick since June 2021, has a target of Rs 760 on the stock. It values the bank at 1.3 times FY24 book value for an FY23-25E return on equity (RoE) profile of 13.3-16 per cent. The brokerage has assigned a value of Rs 205 per share to SBI subsidiaries.
The stock rose 4.9 per cent to hit a record high of Rs 622.90 level on BSE. The scip is up 29 per cent year-to-date.
Nuvama Institutional Equities has upgraded the stock to ‘Buy’ from ‘Hold’ with a revised target of Rs 715 from Rs 595 earlier.
“We are increasing EPS by 14 per cent/10 per cent for FY23E/FY24. In anticipation of NIM expansion sustaining in H2FY23 and the credit cycle remaining strong and benign, we are increasing the target valuation to 1.5 times BV FY24E from 1.2 timrd. We retain Rs 180 per share value for subsidiaries,” it said.
The bank’s net interest income rose 12.8 per cent year-on-year to Rs 35,183 crore, up from Rs 31,184 crore in July-September 2021. The bank’s net interest margin (NIM) stood at 3.55 per cent in the reporting quarter against 3.23 per cent in June and 3.50 per cent in the September quarter last year.
Elara sees the stock at Rs 717. Nirmal Bang Institutional Equities said that the bank is currently carrying a 75 per cent provision coverage ratio (PCR), along with 105 bps coverage on standard loans. The current coverage ratios indicate healthy provisioning buffer, it said. while suggesting a target of Rs 718 on the stock.
Motilal Oswal sees the stock at Rs 700. JM Financial said SBI is in ‘cruise mode’. It expects the stock’s outperformance over Nifty to continue going ahead.
” We see greater probability of the bank trading closer to 1-SD above its long-term valuation average as witnessed in FY2011-2013,” it said.
The scrip commands 32 ‘Buy’ ratings, 5 ‘Buy’, two ‘Hold’ and nil sell rating as per publicly available data with Trendlyne.
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