SBI:Upgrading PT, still a BUY
Upgrading PT to Rs3,765
We are upgrading our price target to Rs3,765, as we roll over our EPS
to FY12F, factor in the equity dilution of US$5bn that is likely to
happen before March 2011, and increase our target multiple from 1.5x
to 2x for the parent bank and from 1.5x to 1.8x for the associate banks.
Pre-dilution, our PT has been revised by 35%; including the dilution,
our PT revision is 45%. We believe that even post dilution, SBI can
trade at the pre-dilution multiple, as it has a track record of leveraging
new funds within one to two years. After a 20% dilution in March 2008,
SBI’s RoE was 17.1% in March 2009.
Increase in target multiple, led by improved NIM outlook
The key driver of our increased target P/BV multiple is the improved
outlook for margins, with SBI refocusing on retail deposits and savings
accounts rather than bulk deposits. We revise our sustainable NIM to
2.6% from 2.5% earlier.
BUY SBI for valuations, strong core in 2Q
At 1.7x P/BV and 10x P/E for FY12F, SBI is still inexpensive relative
to private and other state banks. We find the risk-reward attractive,
given the expected strong core growth of 47% y-y in 2QFY11F. We
expect net profit will grow a strong 27% in FY11F and 22% in FY12F.
We expect SBI will list its life insurance business in FY12.
2QFY11F – Net to grow 18%, core to grow 47%
We estimate net profit growth of 18% y-y (flat q-q) for 2QFY11F. We
expect NIM will expand 8bps q-q driven by better loan yields. Core
operating growth should be strong at 47% y-y. But the bank will also
book MTM losses of Rs4bn, we estimates, resulting in net profit
growth being lower (but still strong) at 18% y-y.
No comments:
Post a Comment