Stock to Buy Today- SBI

MO Investment Idea – SBI
(CMP : INR 612   TP : INR 700, 14% Upside, Buy)

SBI delivered robust Q2 with PAT up 74% YoY to Rs13265 crore led by margin expansion and lower provisions. NII grew 13% YoY as margin expanded 30bp QoQ to 3.3%. Fresh slippages moderated to INR24b, which coupled with healthy recoveries/upgrades resulted in GNPA/NNPA ratio improving 39bp/20bp QoQ to 3.5%/0.8% in 2QFY23, respectively.

Loan growth remains healthy, led by Retail loans and pick-up in corporate segment. We expect this momentum to stay robust with 14-16% growth in FY23. High mix of floating loans, which will benefit from loan re-pricing, will continue to support the NII and overall earnings even as deposit cost could see some increase.

SBI is one of the few large-cap stocks available at reasonable valuation (1.4x FY24 P/B) with high growth visibility (expect ~32% earnings CAGR over FY22-24). We expect bank to deliver an FY24 RoA/RoE of 1.0%/ 17.3%, respectively.

Loan growth remains healthy, led by Retail loans and a pick-up in the Corporate segment. The Housing segment remains strong (disbursement up 35% YoY), with falling unsold inventory levels. SBIN has been selective in the SME segment and is underwriting loans in chosen segments. In the Corporate segment, working capital utilization/new sanctions grew 54%/46%, driven by term loans and loans to NBFCs, Oil majors and the Infrastructure sector (led by renewables which have been its major focus area). There has been some moderation in loan growth in 3QFY23. Nevertheless, it expects a loan growth of 14-16% in FY23, while growth in FY24 will depend on the global macro environment.

Source:- Motilal Oswal

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