SBI Cards Q4 Review: Analysts Say 'Buy' On Better Spends, Asset Quality; Stock Falls

Here's what brokerages have to say about SBI Cards' Q4 FY22 results.

Kotak Securities

• Maintains 'buy' with a target price of Rs 1,150 apiece.

• 25% YoY operating profit growth and 45% YoY decline in provisions aided 3.3x earnings growth in Q4.

• It is entering FY23 with a solid balance sheet and positive intent.

• NII growth is showing acceleration but still lags receivable growth.

• Strong recovery in spends and healthy card additions supported interchange fee growth.

• Headline NPA ratios are nearly back to pre-Covid levels.

• Identifies weak growth in revolvers, impact of MDR regulations and competition as key issues that would take time to resolve.

• SBI Cards would be key beneficiary of digital payment adoption and credit card business, which has an extremely attractive growth trajectory.

• Likes SBI Cards for high market share, strength of its parent that lower acquisition costs and high-quality customers.

• The focus would shift to fresh cards issued and spend growth in the upcoming period.

• SBI Cards has scope of rerating, and along with solid earnings growth, makes it an attractive stock.

Nomura

• Reiterates 'buy' with a target price of Rs 1,250, an implied return of 50.45%.

• Lower credit cost drove PAT beat.

• SBI Cards is entering a transitory phase, where revolver book will build up in FY23F.

• Asset quality drags are completely behind.

• Expects EPS CAGR of 37% over FY22-25F, with RoEs averaging 26-27% over FY23-25F and spends/loan growth at a 21% CAGR.

• The current valuation is still at a 10.5% discount to Bajaj Finance for a significantly superior RoE profile.

• Expects credit cost to undershoot on a lower revolver mix of 25-27% compared to pre-Covid level of 35%.