BackSBI shares: Analysts suggest buying with target price of ₹700 after strong Q2
During Q2FY23, SBI's net interest income (NII) stood at ₹35,183 crore up by 12.83% yoy, while net interest margin (NIM) expanded by 5 basis points year-on-year to 3.55% domestically. Operating profit was at ₹21,120 crore increasing by 16.82% yoy.
PremiumState Bank of India (SBI) will be in focus on stock exchanges this week after garnering a highest ever quarterly net profit of ₹13,265 crore during Q2FY23 rising by 73.93% yoy. Its net interest income witnessed robust growth, while margins expanded further. Advances and deposits logged healthy performance, while the asset quality of the bank is improving in Q2. Overall, earnings momentum accelerated further in the quarter. On the back of a strong quarter, Motilal Oswal analysts have suggested buying in SBI stock for a target price of ₹700 per share going forward.
SBI posted a net profit of ₹7,627 crore in Q2 of FY22.
During Q2FY23, SBI's net interest income (NII) stood at ₹35,183 crore up by 12.83% yoy, while net interest margin (NIM) expanded by 5 basis points year-on-year to 3.55% domestically. Operating profit was at ₹21,120 crore increasing by 16.82% yoy.
Among other key highlights were --- gross advances surging by 19.93% yoy, while deposits registered a growth of 9.99% yoy. Gross NPA dipped to 3.52% in Q2FY23 versus 4.90% in Q2FY22, on the other hand, net NPA reached below 1% to 0.80% in Q2FY23 compared to 1.52% a year ago same quarter. SBI's slippage ratio also improved by 33 basis points yoy to 0.33%. The provision coverage ratio was at 77.93% improving by extensively 788 basis points yoy in Q2.
That being said, SBI beats street expectations in Q2. The bank announced its Q2 on the weekend of November 5th.
Last week, on Friday, SBI shares closed at ₹593.75 apiece up by 1.53%. The stock had even touched a new 52-week high of ₹596.75 apiece on the day. Its market cap is around ₹5,29,898.82 crore.
Should you buy SBI shares post-Q2?
SBI is the peferred pick in the banking sector of Motilal Oswal.
In a report, research analysts Nitin Aggarwal and Yash Agarwal at Motilal Oswal said, "SBIN delivered a robust quarter led by margin expansion and lower provisions. Even treasury performance improved that supported other income. This coupled with strong control on opex enabled a 17% YoY growth in core PPoP. Loan growth was strong and the bank expects the momentum to continue."
Further, in the report, analysts added that a high mix of floating loans, which will benefit from loan re-pricing, will continue to support the NII and overall earnings even as deposit costs could see some increase. Asset quality performance was strong with continuous improvements in slippages and headline asset quality ratios with restructured book being under control at 0.9%.
On the valuation, the analysts note said, "We raise our FY23E/24E EPS by 14%/6% to factor in higher NII and lower provisions even as we model higher employee expenses due to wage revisions. We thus forecast SBIN to report strong earnings progression at 32% CAGR over FY22-24. We estimate an RoA/RoE of 1.0%/17.3% in FY24. We revise our TP to ₹700 (based on 1.4x FY24E ABV + ₹192 from subsidiaries). SBIN remains one of our preferred picks in the sector."
In a year, SBI shares have climbed by nearly 12%. The stock was near ₹530 levels on November 4th last year.
SBI shares had posted a 52-week low of ₹425 apiece on BSE on March 8, 2022. From this 1-year low, the shares have skyrocketed nearly 40% to date.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.
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