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STATE BANK OF INDIA (SBI)
PRICE: RS.2556 RECOMMENDATION: BUY
TARGET PRICE: RS.3101 FY16E P/E: 12.9X; P/ABV: 1.8X
Fresh impairments (gross slippage + new restructuring) have been on
declining trajectory during last five consecutive quarters, which provides
comfort. We also opine that asset quality pain is likely to ebb, going
forward. Its liability franchise continues to be robust which has helped SBI
to contain its funding costs. However, weak sanctions & higher repayment
might put pressure on the loan growth. Although there is a systemic
pressure on NIM as bargaining power is shifting in favor of borrowers as
well as shift in the loan mix towards lower yielding retail assets, SBI can
maintain its NIM at present levels as pressure of income de-recognition due
to loan impairments is lower, in our view.
We believe, SBI is a better play amongst PSU banks in likely improvement in
the macro-economic environment, with peaking NPL cycle, comfortable
capital, well managed opex and reasonable valuation. Stock trades at
reasonable valuation (1.2x its FY16E ABV) after stripping the value of its
subsidiaries. We retain BUY rating on the stock with revised TP of Rs.3101
(Rs.2970 earlier) based on SOTP methodology where core business is valued
at Rs.2228 (1.6x FY16E ABV) and subsidiaries are valued at Rs.873 (post 20%
holding company discount).
�� India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details ��
��
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STATE BANK OF INDIA (SBI)
PRICE: RS.2556 RECOMMENDATION: BUY
TARGET PRICE: RS.3101 FY16E P/E: 12.9X; P/ABV: 1.8X
Fresh impairments (gross slippage + new restructuring) have been on
declining trajectory during last five consecutive quarters, which provides
comfort. We also opine that asset quality pain is likely to ebb, going
forward. Its liability franchise continues to be robust which has helped SBI
to contain its funding costs. However, weak sanctions & higher repayment
might put pressure on the loan growth. Although there is a systemic
pressure on NIM as bargaining power is shifting in favor of borrowers as
well as shift in the loan mix towards lower yielding retail assets, SBI can
maintain its NIM at present levels as pressure of income de-recognition due
to loan impairments is lower, in our view.
We believe, SBI is a better play amongst PSU banks in likely improvement in
the macro-economic environment, with peaking NPL cycle, comfortable
capital, well managed opex and reasonable valuation. Stock trades at
reasonable valuation (1.2x its FY16E ABV) after stripping the value of its
subsidiaries. We retain BUY rating on the stock with revised TP of Rs.3101
(Rs.2970 earlier) based on SOTP methodology where core business is valued
at Rs.2228 (1.6x FY16E ABV) and subsidiaries are valued at Rs.873 (post 20%
holding company discount).
�� India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details ��
��
LINK
http://www.kotaksecurities.com/pdf/dmb/MorningInsight24092014ad.pdf
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