Brokerages hail SBI’s robust Q4 numbers, raise target price

Brokerages have hailed PSB major State Bank of India's (SBI) stellar financial performance in the January-March quarter, increasing the target price of the banking heavyweight. Beating the Street estimates, India's largest public sector lender yesterday reported a 24% year-on-year rise in profit at ₹20,698 crore for the quarter ending March 31, 2024, up from ₹16,694.51 crore in the year-ago period.

Antique Stock Broking Ltd, in its analysis, says SBI's net profit beat its estimates of ₹12,900 crore on lower than expected employee cost as over ₹5,000 crore actuarial hit on retirement benefits due to wage revision did not come about. "Further, write-back of standard asset provisions, better recoveries from written-off loans, and miscellaneous other income helped beat PAT," the brokerage adds.

The bank's overall performance, says Antique, was "strong", prompting it to upgrade FY25 PAT by 9% to factor in better "NIMs and lower credit cost”, while it largely maintained FY26 estimates. "The banks' balance sheet positioning is strong and our comfort over near term earnings/asset quality stays, therefore we maintain BUY with a revised TP of INR 900 (1.4x FY26 BV and INR 207 for subsidiaries)."

ICICI Securities says SBI had a strong finish to the year, and that its outlook remains robust. "We build-in loan CAGR of ~15% for FY24–26E, at the upper-end of guidance, which coupled with muted opex growth (off high base) should lead to sector-leading 20% CAGR in core PPoP in the same period. We estimate the bank to deliver ~100/90bps RoA for FY25/26."

The brokerage major has maintained a "BUY" rating, with a revised target price of ₹980 (earlier ₹780), valuing core banking business at 1.6x FY26E. "We see merit in the rise in multiple given sustained strong execution, healthy deposits franchise, superior PPoP growth, continued comfort on asset quality and high visibility of >16% RoE."

Kotak Institutional Equities has also given a "BUY" call on the stock, raising the target price by 16% to ₹950 from ₹850 earlier. The brokerage says the bank has beaten the estimates in recent quarters and decent revenue growth and low provisions contributed to robust profit in Q4 FY24.

The SBI stock, meanwhile, is trading 0.65% up at ₹825.00 today. The scrip opened a gap-up at ₹819.65 today on the BSE and surged to an intra-day high of ₹832.10, just 0.8% lower than ₹839.60 touched on May 9, 2024. At the current share price, SBI's m-cap stands at ₹7.35 lakh crore.

The PSU share has surged 44.10% in the past year and gave a 28.60% return in the year-to-date period. In the six months and past-month periods, the scrip gave 42.36% and 6.12% returns.

SBI’s net interest income in Q4 FY24 surged to ₹41,656 crore against ₹40,392.5 crore, up 3.1%. The FY24 net profit came in at ₹61,077 crore, up 21.59% YoY after accounting for wage settlement and one-time exceptional item of ₹7,100 crore. The FY24 operating profit grew 12.05% to ₹93,797 crore; while operating profit for Q4 grew 16.76% to ₹28,748 crore.

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