'Buy' SBI Cards Shares Maintains Axis Securities Post Q2 Results, Hikes Target Price — Here's Why

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Axis Securities Report

We have revised our SBI Cards and Payment Services Ltd.'s net interest income estimates marginally downwards by 1–2% over FY26–27E, factoring in steady margins versus our earlier expectations of improvement, given the headwinds on IEA within the receivables mix.

Similarly, higher operating expenses are expected to offset the positive impact of improving credit costs. Consequently, we have reduced our earnings estimates by 15% and 9% for FY26E and FY27E, respectively.

We broadly maintain our FY28E estimates with minor tweaks. We believe that improving credit costs will remain the key lever driving RoA improvement.

We expect SBI Cards to deliver RoA/RoE of 4.5– 5.4%/20–23% over FY27–28E, marking a significant improvement from 3.2%/15.1% in FY26E.

Valuation & Recommendation:

We maintain our Buy recommendation with a target price of Rs 1,035/share, implying an upside of 11% from the current market price. We value SBI Cards at 29x FY27E EPS (vs current valuations of 26x FY27E EPS).

Key Risks to Our Estimates and target price

The key risk to our estimates remains a slowdown in overall spending, and new customer sourcing momentum would impact the revenue generation capability of the company.

• Another key risk area for SBIC is an unfavourable receivable mix with a skew towards non-interest-yielding loans (transactors), which will continue to keep margins under pressure.

• Continued asset quality headwinds, resulting in elevated credit costs, could potentially derail our earnings estimates.

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