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SBI share price rises over 50% in three months; here's what lies ahead

SBI share has gained from Rs 189 to Rs 225.90 in a month, rising nearly 20% against a mere 2.58% surge in Sensex

Aseem Thapliyal | August 28, 2020 | Updated 16:29 IST
SBI share rises over 50% in three months; here's what lies ahead
SBI share price : CLSA seems to be most bullish on the stock with a target price of Rs 310, an upside of nearly 50 percent from Thursday's closing of Rs 209

Share price of State Bank of India (SBI) is attempting a recovery to pre-Covid levels in line with benchmark Sensex. The share which was trading at Rs 300 plus mark in February fell to Rs 149.55 on May 22 this year affected by weak business and market sentiment due to the coronavirus pandemic induced lockdown.

However, SBI share has made a strong recovery 51% till date.

In fact, in last one month, the share has gained from Rs 189 to Rs 225.90, rising nearly 20% against a mere 2.58% surge in Sensex.

The primary reason for an increase in the share price of the SBI bank is an inexpensive valuation. Jaikishan Parmar, senior equity research analyst at Angel Broking said, "Currently core banking business is trading at 0.40 times of FY22E Book Value, which we believe is an inexpensive valuation and a significant discount compared to the historical average."

"The stock has gained as IPO possibility of SBI's subsidiaries such as UTI AMC, SBI AMC, and NSE will provide much-required capital in the current situation. Almost all subsidiaries are growing at a healthy rate by leveraging SBI's  infrastructure,"  Parmar added.

Abhijeet Ramachandran, Independent Analyst/ Co-Founder and trainer at Tips2trade sai, "SBI has been trading in a very narrow range of Rs 185-207 since the past 2 months. Today, we have seen a clear technical breakout due to positive sentiment in both Nifty & Bank Nifty. An immediate target of Rs 231 is very possible. New investors should now look to enter at 210-215 levels for higher targets of Rs 250-263 in the coming weeks."

Brokerages too are bullish on the large cap stock.

On August 27, global investment bank UBS upgraded the banking stock from sell to buy with a target price of Rs 260.

"Bank stocks are down 12-62 percent year-to-date and have underperformed the broader markets. We think the sector's downside risks are limited and upgrade SBI from sell to buy," UBS said in a note. 

Moody's downgrades SBI's standalone profile on asset quality, profitability concerns

CLSA seems to be most bullish on the stock with a target price of Rs 310, an upside of nearly 50 percent from Thursday's closing of Rs 209. On August 20, CLSA in a note said, "SBI presents a deep value opportunity, in our view, as the bank is relatively better positioned on asset quality post-COVID-19, driven by high government/PSU share in loan book," said the CLSA note.

"We are more comfortable on SBI's asset quality/disclosures and hence increase our SOTP-based target price from Rs270 to Rs310, valuing core bank at 0.7x Jun-22 book and Rs131/share of sub value," the report added.

Meanwhile, SBI share price closed 4.22% higher at Rs 224.85 today. The stock has gained 14.84% in the last 6 days. The share stands higher than 5 day, 20 day, 50 day and 100 day moving averages but lower than 200 day moving averages. Total 60.96 lakh shares changed hands today amounting to turnover of Rs 135.37 crore.

Market cap of the lender stood at Rs 2 lakh crore. However, the share is down 20% in one year and  fallen 32% since the beginning of this year.

Country's largest lender reported a 81 per cent rise in standalone net profit at Rs 4,189.34 crore for the first quarter of current fiscal as bad loans declined. The lender had reported a net profit of Rs 2,312.02 crore in the April-June quarter of 2019-20.

State Bank of India's (SBI) standalone total income increased to Rs 74,457.86 crore in the first quarter of 2020-21 as against Rs 70,653.23 crore in the same period a year ago.

Its gross non-performing assets (NPA) of the total advances declined to 5.44 per cent at June-end, over 7.53 per cent at June-end last year.

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