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SBI Cards and Payment Services Ltd reported a jump of over three-fold in its net profit at 580.8 crore in the quarter ended March 2022 as compared to 175 crore in the same quarter of the previous fiscal year.

The company's gross NPA (non-performing assets) and net NPA as on March 31, 2022 is 2.22% and 0.78% respectively, as against 4.99% and 1.15% respectively during the same period a year ago.

Analysts at Yes Securities believe that SBI Cards stock price represents overstretched concerns on MDR reduction and lack of flexibility to recoup it, structural pressure on cost-income/profitability from increased competitive intensity, impact on growth from rising scale of the new-age card cos. and BNPL. 

“We believe card base/spend growth will remain strong for SBI cards. Being the only listed pure-play credit card issuer with significantly higher profitability than Banks and NBFCs (in good times as well as bad times), SBI Cards would continue to command a premium valuation," Yes Securities added. 

The brokerage has reiterated its Buy tag on SBI Cards shares with 12-month price target of 1,260, implying a potential upside of more than 50% from the current level.

“SBI Cards has reported a positive surprise in Q4FY22 driven by lower credit costs. However, there has also been lower growth in receivables mix. As a business combination, lower revolver with lower credit cost is good but less than optimal. As such, improvement in loan book and revolver mix will be the next earnings levers post normalisation of credit cost," highlighted brokerage ICICI Securities. The brokerage's Buy rating on SBI Cards shares comes with a target price of 1,060.

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

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