SBI share surges 4% post Q4; analysts see up to 51% upside

Shares of State Bank of India (SBI) rallied nearly 4% on Monday, in sync with benchmark indices, after the country’s largest lender delivered a stable fourth quarter results on operating and assets quality front. Analysts maintained a bullish stance on SBI shares with targets suggesting up to 51% potential upside in the counter.

SBI share price has underperformed the market with its shares falling more than 11% in the last one month as compared to 9% decline in the BSE benchmark Sensex. The largecap banking stock has fallen over 5% in a week and 3% on a year-to-date (YTD) basis. However, the stock has outperformed the benchmark index in terms of one year return by notching 26% growth as compared to 9% rise in Sensex.

Snapping two sessions losing streak, SBI shares opened higher today and gained as much as 3.66% to hit an intraday high of ₹461.35 on the BSE. The stock hit a 52-week high of ₹549.05 on February 7, 2022, and a 52-week low of ₹359.60 on May 14, 2021. In comparision, the BSE Sensex was trading 240 points higher at 53,034 levels.

The PSU lender on Friday reported a 41% growth in net profit at ₹9,113.53 crore for the quarter ended March 2022, as against ₹6,450.75 crore in the same quarter a year ago. The bank’s net interest income rose 15% to ₹31,198 crore in Q4FY22, compared with ₹27,067 crore in the corresponding period last year. On the asset quality front, the bank’s gross non-performing asset (GNPA) as a percentage of total advances ratio stood at 3.97% at the end of the fourth quarter compared with 4.5% as of December 31, 2021. Net NPA ratio too improved 32 basis points on a quarterly basis to 1.02%. Provisions for the quarter dropped 34.5% year-on-year to ₹7,327 crore.

Analysts see up to 51% upside in SBI

Domestic brokerage firm ICICI Securities have maintained a buy rating on SBI shares with an unchanged target price of ₹673, a potential upside of 51% from Friday’s closing price of ₹445.05 on the BSE. The agency in its report says SBI exited financial year 2022 with 13.9% return on equity (RoE) and 0.67% return on assets (ROA), driven by growth build-up, steady credit cost and improvement in margins. Credit growth gathered pace in Q4FY22 (up 6% QoQ and 11% YoY) led by sequential growth in corporate (11.1% growth) and retail (5.3%).

Going forward, the agency expects the bank to expand utilisation of its credit limits, driven by strong corporate portfolio growth. As of Q4, it had a working capital unutilised limit of ₹2.76 lakh crore and a term loan unutilised limit of ₹2 lakh crore. “Overall, utilisation of sanctioned limits coupled with high-single digit GDP growth outlook gives confidence that credit growth is likely to pick up further momentum in FY23E. Overall, we are building-in credit growth at 13%/15% for FY23E/FY24E respectively,” it says.

Analysts at LKP Securities have also recommended a ‘buy’ call on the stock with a target price of ₹565 per share, an upside of 27% from current market price of ₹445.” With improving asset quality, ample contingent buffer and strong growth outlook, we believe the ROE target of 15% is achievable in mid run. We recommend BUY with a target price of ₹565,” it says.

The agency expects SBI to post a ROA/ROE of 0.8%/14% by FY23E led by healthy balance sheet growth along with higher provision coverage ratio (PCR) and stable asset quality.

Meanwhile, YES Securities also gave a buy call on SBI shares with a target price of 659, a potential upside of 48% from the current market price. “We value the bank at 1.35x FY23 P/BV for an FY23E/24ERoE profile of 14.3/15.8%. We assign a value of Rs 181 per share to the subsidiaries, on SOTP,” the brokerage says.