SBI stock holds potential after 13% drop from life high, up to Rs 171 per share gain seen: Emkay

SBI share target price: Investors are likely to earn Rs 171 per share on State Bank of India stock over the next 12 months, according to an Emkay report. The brokerage has raised SBI’s earnings for FY23E by 11 per cent and FY24E by 4 per cent on expectations of better margins, lower treasury drag, while estimating a 31 per cent upside in the stock. It expects the bank to report a decadal-high RoE (Return on Equity) of 17-17.5 per cent without equity dilution.  

SBI shares today ended at Rs 550.85 on the NSE, up by Rs 1.10 or 0.20 per cent. 

SBI share: Triggers 

1) Q3 Results 2023: SBI reported its highest-ever quarterly Profit After Tax (PAT) in December quarter at Rs 142 billion on continued strong margin uptick and reversal of MTM provisions, partly offset by higher standard asset provisions, Emkay said in its report. Bank continues to guide for sustained healthy growth/margin and reduction in NPAs which should drive-up its RoA to 1 per cent in the medium term. 

2) SBI reported its highest-ever quarterly Profit After Tax (PAT) in December quarter at Rs 142 billion on continued strong margin uptick and reversal of MTM provisions, partly offset by higher standard asset provisions, Emkay said in its report. Bank continues to guide for sustained healthy growth/margin and reduction in NPAs which should drive-up its RoA to 1 per cent in the medium term.

3) Bank continues to outpace the system credit growth at 19 per cent YoY and 4 per cent QoQ led by strong traction in retail/SME growth, while deposit growth lags, leading to higher LDR at 73 per cent. This, coupled with continued asset re-pricing, led to an 18bps QoQ jump in NIM to 3.5 per cent. 

4)  Management believes that the improving LDR (Loan To Deposit Ratio) and higher share of the MCLR book will continue supporting margins.

6)  Bank has seen steady improvement in asset quality, with NNPA at < 1 per cent, given the aggressive write-offs and provisioning policy.

7)   Bank stated that its exposure to the Adani Group is at 0.9 per cent of loans (Rs 269 billion)/8.4 per cent of NW, but believes that the exposure is well collateralized and does not pose any immediate default risk. 

SBI Share Price Movement 

PSU Bank stocks including SBI are trading at corrected levels. The Nifty PSU Bank index has outperformed the broader market Nifty50 index over a 1-year period giving nearly 30 per cent returns according to data sourced from Trendlyne. However, it has underperformed Nifty50 over a 1-month period giving returns of negative 8.58 per cent as against 0.70 per cent returned by the 50-stock index during this period. 

Meanwhile, SBI has outperformed Nifty50 by 3.5 percent in the 1-year period. The stock has corrected from lifetime highs of Rs 629.55 which the stock hit on 15 December 2022. The SBI share price is down 13 per cent.  

The stock is trading at a Price to Book value of 1.74 which is above the industry median, Trendlyne says. The stock is volatile with a 1-year beta of 1.1.  

Momentum indicator Relative Strength Index (RSI) stood at 40.1, while day's MFI stood at 33.7. A number below 30 is considered oversold and above 70 overbought. 

Source: NSE

SBI Share: Technical View 

Analyst Nilesh Jain holds a positive view on this stock and recommends a 'Buy' in SBI. The stock has corrected from its highs and must be considered for buy on declines, Jain said.  

Jain, who is Assistant Vice President - Lead Derivative and Technical Research at Centrum Broking puts a target between Rs 570 and Rs 590 with a stop loss of Rs 520. His view is for February series.

(Disclaimer: The views/suggestions/advises expressed here in this article is solely by investment experts. Zee Business suggests its readers to consult with their investment advisers before making any financial decision.)