Home / Markets / Stock Markets /  SBI shares: Prabhudas Lilladher raises target price, sees new high

Brokerage and research firm Prabhudas Lilladher recently interacted with the State Bank of India's (SBI) management to understand credit outlook, changes in credit appraisal, asset quality view and opex trajectory. The bank is optimistic on loan growth, as improving economic activity and tight liquidity may support its credit offtake, it said in a note. 

“New proposals and unavailed limits within corporate total to 6 trn, while retail momentum might continue. With cash flows normalizing for SMEs, the ECLGS/OTR pools are also performing well. Underwriting has strengthened with induction of non-sales personnel in credit appraisal and robust credit research across 36 sectors," the note stated.

SBI's asset quality may remain under control and target is to keep credit costs below 1% and while the brokerage house has slightly tweaked its estimates, it expect a core PAT (profit after tax) CAGR (compound annual growth rate) of 20% over FY22-25E. It has maintained its Buy rating on SBI shares and raised its target price to 650 apiece from 620. The PSU bank stock is currently hovering around its all-time high level of 578 on the BSE.

With economic activity improving, domestic credit demand has been strong despite banking system usually witnessing de-growth in the first quarter. Credit growth is expected to continue owing to strong fundamentals, although there could be minor hiccups due to global macros, Prabhuas Lilladher highlighted.

“Another lever to credit growth sustaining, is tightened system liquidity which would urge corporates to turn towards banks for satisfying their credit requirements. SBI is ready to participate in this opportunity, as underwriting and monitoring processes have been strengthened to make balance sheet more resilient. Overall growth expected in FY23 is 15%, in-line with industry," it added.

“Capex pipeline is expected to shore up from H2FY22. Target would be to maintain market share, however pricing wouldn’t be compromised. Improvement in yield would be visible from Q3 onwards. Competition has been increasing in corporate with some PSU banks vying for market share; however, SBI is selectively participating without compromising on pricing," the brokerage said.

The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.

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