Prabhudas Lilladher has given Accumulate recommendation for SBI Cards and Payment Services with a target price of Rs. 1162 in its research report issued on Jan 24, 2022

Prabhudas Lilladher’s research report on SBI Cards and Payment Services

SBICARD’s Q3FY22 earnings (PAT at Rs 3.8bn up 12%QoQ/84%YoY but below ests) exhibited mixed earnings show as seasonality played out on business and costs metrics. While receivables at Rs291bn (PLe: Rs278bn) grew healthy 13%YoY/9.0%QoQ and stood marginally higher than our estimates (PLe: Rs278bn), opex increased 24%QoQ/28%YoY due to festive season with cost-income trending as high as 60%. Yields stood under tad pressure as higher yielding revolver mix stood stagnant at 27% of overall receivables. While GNPAs stood lower at 2.4% vs 3.4% in Q2FY22 led by aggressive write-offs, credit costs at 9% continues to remain elevated despite earlier guidance of declining trends. Corporate spends traction continues to stay robust clocking 53%QoQ growth aiding fees/others (15%QoQ/31%YoY).

Outlook

We maintain Accumulate rating on the stock as SBICARD maintains high return profile (6.5%+RoA/ 26%RoE) with 32% EPS CAGR over FY22-24. Our valuation multiple at 42x PE Sep’23E results into price target of Rs1,162 and that remains unchanged.

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