Brokerage pegs SBI Cards target price at Rs 1045, stop-loss Rs 935

In its report today, brokerage Bonanza Portfolio says that SBI Cards stock should be bought with a target of Rs 1045 and stop-loss of Rs 935. SBI Cards on the weekly chart is trading in a rising channel pattern and is currently placed near the support of a lower band of a rising channel pattern. The counter is trading above its 50 & 100-day exponential moving averages on a weekly as well as monthly time frame, which is positive for the prices in the near term. SBI Cards share price closed at Rs 982, up Rs 31 or 3.3. It has moved from Rs 927 to Rs 982 in the last one week. 

Another brokerage, Equirus, in its report said that SBI Cards is the only listed pure-play credit card company within a highly profitable segment that has top decile profitability within the payments/lending universe. SBI Card will likely clock a robust 29% EPS CAGR over FY22-FY25E and will continue to command strong return ratios with RoAs / RoEs above 6%/27% in the medium term. Equirus says it has initiated coverage on the stock with ADD and Mar’22 target price of Rs 1120.

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Evaluating India’s credit card data from various sources Equirus believes:

(a)   about 30-35% of card holders contribute to bulk of the spends
(b)   credit card utilization levels decline with time
(c)   credit card penetration seems high at above 60% in the potential high spender’s segment,
(d)   approximately 76% of credit cards are owned by the salaried segment with 30-35% penetration in formal salaried

In terms of the opportunity size, Equirus believes:

(a)   superset for credit card issuances is 78 mn-80 mn households in India, of which 67 mn are urban (or 60% of urban households)
(b)   around 20% of spends for cardable households would already be via credit cards
(c)    spends/loan CAGR is likely to be at 18%/16% over FY22-FY31E with cards/individuals increasing to 2.5 from 1.5 currently