HDFC Securities has given Buy recommendation for State Bank of India with a target price of Rs. 455 in its research report issued on Feb 05, 2021
HDFC Securities’ research report on State Bank of India
SBIN’s 3Q earnings were significantly ahead of our estimates on the back of (1) better-than-expected margins and (2) lower-than-expected provisions. The biggest surprise, however, was SBIN’s performance on asset quality metrics with pro forma slippages (94bps annualised) and restructuring requests (0.8% of loans) coming in well within management guidance. With the back-book sufficiently provisioned against (pro forma PCR at 67%) and potential buildup in stress in line with the best-in-class private sector banks (evidence of comparable quality of underwriting in retail and SME), we see potential for a meaningful narrowing of SBIN’s valuation discount to its private bank peers. We continue to be conservative on accretion to stress (possible lagged impact) and loan loss provisions (on both pools of potential stress).
We raise FY21-23 earnings by 12-27% and reiterate BUY with a revised target price of INR455.