Motilal Oswal has given Neutral recommendation for SBI Cards and Payment Services with a target price of Rs. 1200 in its research report issued on Mar 01, 2021
Motilal Oswal’s research report on SBI Cards and Payment Services
SBI Cards and Payments Services Ltd (SBICARD) has strengthened its position as the second largest card player in the country – with market share of ~19% in o/s cards and ~20% in overall spends. The company has an o/s card base of ~11.5m and has doubled its card base over the past three years at an average incremental market share of 23%. SBICARD has access to parent SBIN’s vast network of ~22k branches and customer base of ~450m, along with strong open market sourcing capabilities. Thus, it remains well-placed to capitalize on growth opportunities in a highly underpenetrated market. The company has delivered average RoA/RoE of ~5%/29.5% over FY18-20. While COVID-19 has disrupted the growth trajectory, recovery has been fairly sharp, with retail spends surpassing pre-COVID levels.
Outlook
We estimate a loan book / earnings CAGR of 27%/47% over FY21-23E, while margins are likely to remain broadly stable. We estimate credit cost to moderate gradually, and expect the company to report healthy return ratios with RoA/RoE of 6.6%/28.4% in FY23. We initiate coverage with a Neutral rating and TP of INR 1,200 (43x FY23E EPS).