Up to 30% upside! Here's why KRChoksey is bullish on this public sector bank
The scrip has jumped around 92 per cent to Rs 477 on December 6 from its 52-week low of Rs 248.15.
- Dec 6, 2021,
- Updated Dec 6, 2021 4:36 PM IST
According to experts, the market is likely to remain volatile in the near term and investors should be careful while picking stocks amid the volatility. In a recent report, brokerage house KRChoksey stated that the State Bank of India (SBIN) is best positioned to capture growth opportunities. The brokerage firm is bullish on the stock and has a 'Buy' rating with a target price of Rs 617 per share. The scrip has jumped around 92 per cent to Rs 477 on December 6 from its 52-week low of Rs 248.15. With a market capitalisation of more than Rs 4,14,000 crore, the shares stand higher than 100 day and 200 day moving averages but lower than 5 day, 20 day and 50 day moving averages. As per the report by KRChoksey, SBIN's asset quality has steadily improved over the years. Slippages fell sharply in Q2FY22, owing to strong recoveries and upgrades. This is expected to continue in the coming years, with a declining trajectory in credit costs. The bank is well-capitalized to withstand any additional risk on its portfolio as a result of uncertain circumstances. It added that the country’s largest lender by assets is currently trading at a P/B of 1.5x/1.3x/1.1x for FY22E/FY23E/FY24E book value. We value the bank at 1.4x FY24E P/ABV on an ABV of Rs 376, taking the SOTP value to Rs 617 per share. "It has the lowest cost of funds compared to its peers, focusing on savings account deposits. The bank has also shown a tight control over its operating costs and maintained its efficiency ratios compared to its peers. In addition, it is focused on reducing the C/I ratio to 50% by growing its topline rather than further declining costs," KRChoksey said. "SBI is one of our preferred picks in the banking sector. Given the current market scenario, investors can buy the stock at every dip in a staggered manner," Kranthi Bathini, equity strategist at WealthMills Securities, told BusinessToday.in. SBI reported a 66.7 per cent year-on-year (YoY) and 17.26 per cent quarter-on-quarter (QoQ) growth in net profit at Rs 7,627 crore for the quarter ended September 30.
Net interest income (NII) grew 10.65 per cent YoY to Rs 31,184 crore. The domestic net interest margin (NIM) expanded 16 basis points YoY to 3.50 per cent. Meanwhile, the bank has signed an agreement with Adani Capital Private Ltd (Adani Capital), the NBFC arm of Adani Group, for co-lending to farmers for purchase of tractor and farm implements. "With this partnership, SBI would be able to target farmer customers in the interior hinterland of the country looking for adoption of farm mechanization to enhance productivity of crops. SBI is actively looking at co-lending opportunities with multiple NBFCs for financing farm mechanization, warehouse receipt Finance, Farmer Producer Organizations (FPOs) etc., for enhancing credit flow to double the farmers' income," the press release said.
According to experts, the market is likely to remain volatile in the near term and investors should be careful while picking stocks amid the volatility. In a recent report, brokerage house KRChoksey stated that the State Bank of India (SBIN) is best positioned to capture growth opportunities. The brokerage firm is bullish on the stock and has a 'Buy' rating with a target price of Rs 617 per share. The scrip has jumped around 92 per cent to Rs 477 on December 6 from its 52-week low of Rs 248.15. With a market capitalisation of more than Rs 4,14,000 crore, the shares stand higher than 100 day and 200 day moving averages but lower than 5 day, 20 day and 50 day moving averages. As per the report by KRChoksey, SBIN's asset quality has steadily improved over the years. Slippages fell sharply in Q2FY22, owing to strong recoveries and upgrades. This is expected to continue in the coming years, with a declining trajectory in credit costs. The bank is well-capitalized to withstand any additional risk on its portfolio as a result of uncertain circumstances. It added that the country’s largest lender by assets is currently trading at a P/B of 1.5x/1.3x/1.1x for FY22E/FY23E/FY24E book value. We value the bank at 1.4x FY24E P/ABV on an ABV of Rs 376, taking the SOTP value to Rs 617 per share. "It has the lowest cost of funds compared to its peers, focusing on savings account deposits. The bank has also shown a tight control over its operating costs and maintained its efficiency ratios compared to its peers. In addition, it is focused on reducing the C/I ratio to 50% by growing its topline rather than further declining costs," KRChoksey said. "SBI is one of our preferred picks in the banking sector. Given the current market scenario, investors can buy the stock at every dip in a staggered manner," Kranthi Bathini, equity strategist at WealthMills Securities, told BusinessToday.in. SBI reported a 66.7 per cent year-on-year (YoY) and 17.26 per cent quarter-on-quarter (QoQ) growth in net profit at Rs 7,627 crore for the quarter ended September 30.
Net interest income (NII) grew 10.65 per cent YoY to Rs 31,184 crore. The domestic net interest margin (NIM) expanded 16 basis points YoY to 3.50 per cent. Meanwhile, the bank has signed an agreement with Adani Capital Private Ltd (Adani Capital), the NBFC arm of Adani Group, for co-lending to farmers for purchase of tractor and farm implements. "With this partnership, SBI would be able to target farmer customers in the interior hinterland of the country looking for adoption of farm mechanization to enhance productivity of crops. SBI is actively looking at co-lending opportunities with multiple NBFCs for financing farm mechanization, warehouse receipt Finance, Farmer Producer Organizations (FPOs) etc., for enhancing credit flow to double the farmers' income," the press release said.