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Near term pain long term gain
CHANGE
Initiate coverage with BUY rating and TP INR2,102
The core performance of the bank has improved considerably with high
sustainable CASA ~45%+, improved margins and management’s focus on
quality and profitable growth. However, the unabated high slippages
continue to eclipse the strong underlying core improvements. Recent
ratings downgrade by Moody’s has limited financial impact for SBI.
CATALYST
Moderation in slippages is the only trigger
Its high slippages are a consequence of growth rates of the past few
years. Agriculture, mid corporate & SME segments (MSME) under stress.
MSME in the near term remains under stress with fluctuations in
currency and economic slowdown. We expect its agriculture portfolio to
do well from 3QFY12E and believe the negatives are already in the price.
VALUATION
Valuations are extremely attractive, lot of negatives in the price
It currently trades at 1.3x FY13E ABV adjusted for investments in
subsidiaries at INR109/share and INR608/share for value given to its
subsidiaries from current market prices. Downside risks to our TP and
estimates could arise from continued higher-than-expected slippages and
rights issue at a significant discount leading to higher dilution.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Near term pain long term gain
CHANGE
Initiate coverage with BUY rating and TP INR2,102
The core performance of the bank has improved considerably with high
sustainable CASA ~45%+, improved margins and management’s focus on
quality and profitable growth. However, the unabated high slippages
continue to eclipse the strong underlying core improvements. Recent
ratings downgrade by Moody’s has limited financial impact for SBI.
CATALYST
Moderation in slippages is the only trigger
Its high slippages are a consequence of growth rates of the past few
years. Agriculture, mid corporate & SME segments (MSME) under stress.
MSME in the near term remains under stress with fluctuations in
currency and economic slowdown. We expect its agriculture portfolio to
do well from 3QFY12E and believe the negatives are already in the price.
VALUATION
Valuations are extremely attractive, lot of negatives in the price
It currently trades at 1.3x FY13E ABV adjusted for investments in
subsidiaries at INR109/share and INR608/share for value given to its
subsidiaries from current market prices. Downside risks to our TP and
estimates could arise from continued higher-than-expected slippages and
rights issue at a significant discount leading to higher dilution.
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