SBI Cards and Payment Services Ltd. share price target

Q3FY22 performance of SBI Cards (SBIC) was directionally strong in terms of
gross account additions (1mn), spending growth (46% QoQ) and asset quality
(credit cost/GNPA of 9.0%/2.4% vs 9.3%/3.4% in Q2FY22). The activation rates
(30-day) are also high at 52% in Q3FY22 vs 50% in Q2FY22. Maintain buy with share price target of Rs. 1060

SBICARD reported in-line performance, characterized by sharp growth in spending (47% YoY), while PAT grew 84% YoY to INR3.86b (MOSLE: INR4b). PPOP grew 23% YoY, aided by steady revenue growth (5% beat). Margins stood at 14% (14.1% in 2QFY22), and the management indicated the revolve rate has bottomed out. Retail and corporate spending grew robustly at 36% YoY and 93% YoY, respectively. The GNPA ratio moderated 96bp QoQ to 2.4%, while NNPA declined 8bp QoQ to 0.8%. PCR declined 780bp QoQ to 66%, with the RBI-RE book...

stay robust clocking 53%QoQ growth aiding fees/others (15%QoQ/31%YoY). Going forward, while credit costs pressures are expected to recede (7-8% from current 9%) in commensurate with reduction in RBI RE stock (already down to 2% of overall loans from 9% a year ago), the increased costs (200300bps rise in cost-income over FY22-24 to 62%) to offset the same. Moreover, as normalization returns, we foresee strong fees traction (16%CAGR) to compensate for tepid NIMs (13%+) over FY22-24. Improving asset quality trends to compensate for growing cost pressures especially led by competition & regulatory hindrances (regulation on MDR) and...