SBI Cards and Payment Services Ltd. share price target

SBICARD's Q4FY21 earnings stood mixed as business cyclicality dampened spends traction but asset quality held up. Asset quality continues to show signs of improvement in the nature of 1) mere 48bps spike in GNPAs at 4.99% for Q4FY21 as against our expectations of 5.7%. 2) perceivably stressed book declines from 13.8% in Q3FY21 to 12.6% in Q4FY21 3) RBI RE book at Rs19bn (7.6% of overall receivables) stood down 19% QoQ 4) 36% of RBI RE book (Rs6.9bn) carry 80% provision cover and has already slipped into NPA 5) 51% of RBI RE book exhibiting >2 EMI repayments 6) recoveries surged 10% QoQ;...

SBICARD's Q3FY21 earnings was characterized by sharp improvement in asset quality (proforma GNPAs fell 295bps QoQ, credit costs declined ~430bps, recoveries surged 29%QoQ) and continued business traction (QoQ growth in CIF of 5%, new accounts acquisition at 33% and spends 27%). However, the RBI RE book expanded 11%QoQ to Rs23.4bn, but ~50% of such stock exhibited almost full repayments and only 33% lie under stress. With this 3% stock (Rs7.7bn) carrying 65% provision, ECL at 65% and Rs11bn additional provisions (between Q4FY20-Q3FY21) coupled with improving...

tweak the valuation multiple to 43x P/E (earlier 44.5x) arriving at price target of Rs 1,081 (earlier Rs895). Reiterate ACCUMULATE RATING on the stock. than industry averages on cards-in-force and spends traction. (a) SBICARD records 16%YoY/1.4%MoM card-in-force growth, second best to ICICIB and better than HDFCB. (b) On card spends, SBICARD registers 1.5%YoY/32.7%MoM growth, second best to HDFCB. Moreover, the Co. has maintained MoM market share in terms of outstanding cards at 19% for Oct'20. We expect 17% CAGR in outstanding cards traction over FY21-23 with the...

Net interest income rose 20.0% YoY in Q2FY21, aided by NIM expansion (+185bps YoY) with higher interest income yield (+56bps YoY) and lower cost of funds (-96bps). Non-interest income was up 1.9% YoY. Pre-provision profit grew 37.1% YoY, further helped by lower opex (9.5% YoY). However, PAT fell 45.9%, impacted by higher provisioning. Overall cost to income ratio improved to 49.3% (-10.3bps YoY). Company added 688k new accounts during the quarter. Cards in force...

our conservative stance on credit costs (12%) and NPA (~8%) for FY21 led by pandemic challenges. While we assess 10% of book net of provisions stands under stress as at Sep'20-end, provision run-rate to stay elevated for H2FY21 (avg. Rs8bn). Said that, Q2FY21 witnessed outstanding cards traction (~4% QoQ growth vs negative in Q1FY21) and improved spends (55% QoQ growth) buoyed by retail spends (90% pre-COIVD levels). Such a business rebound coupled with healthy PPoP (13%QoQ/27%YoY) should absorb asset quality...

We revise our rating to HOLD from BUY and revise the target price to Rs 925 (35x FY23E EPS).

We value SBIC at 35x FY23E EPS basis given the long runway for sustainable growth on the back of industry tailwinds, strong parentage, robust business model and effective credit underwriting and collection mechanism. We initiate coverage with a 'BUY' rating with a target price of Rs. 1010

on non-discretionary (88-90% of spends led by both retail & corporate) and digital spends (online retail spends rose to 56% in Q1FY21 from 44% in FY20) translated into healthy loans (Rs 233bn vs PLe of Rs 217bn growing 10%YoY/3%QoQ) and avg daily spends (up 77% to pre-COVID levels) defying lockdown challenges. While NPA (down 133bps YoY/33bps QoQ to 1.35%) and provisioning (42% down QoQ) for the quarter witnessed sharp decline, the same stands masked due to moratorium dispensation. Hence, we build-in...

such challenges, Co has been focusing on new spend categories (education, online health & pharmacies) and utility spends (D&G;, fuel, electronic, wellness). Moreover, continued interest income and repayments from morat customers (24% at Apr-end) could act as cushions. We expect moderation in per card spends (0.5-1% vs ~6% pre-COVID era) and card additions (2% in H1FY21 vs avg 27% pre-COVID era) in H1FY21. While near term challenges stand imminent, sufficient capital, liquidity buffers and robust risk management would support balance sheet resilience. We have built-in...