SBI Cards Q4 Results Review: Credit Cost Decline Brings Relief, But Valuations Remain A Concern
Macquarie remains bullish, maintaining an ‘outperform’ rating and a target price of Rs 1,000.
SBI Cards and Payment Services Ltd. reported a mixed yet encouraging fourth quarter performance, with both Morgan Stanley and Macquarie highlighting the positive shift in credit cost trends. While credit costs have finally begun to ease after eight consecutive quarters of pressure, views differ on how sustainable the improvement will be, and how the stock is currently priced.
Net profit came in at Rs 530 crore, down 19% year-on-year but up 39% quarter-on-quarter, beating analysts' expectations by 13%–15%. Besides lower operational expenses, net interest margins, which rose 54 basis points sequentially to 11.2%, were higher than expected. Credit costs, a key concern over recent quarters, declined to 9.0% from 9.5% QoQ.
Macquarie remains bullish, maintaining an ‘outperform’ rating and a target price of Rs 1,000. The firm notes that credit costs were in line, but stronger NIMs and improved cost efficiency boosted earnings. Management expects NIMs to remain stable through financial year 2026, with some pressure anticipated from a potential decline in the revolver mix and planned repricing of the EMI book, which currently makes up 35% of the portfolio.
In contrast, Morgan Stanley is more cautious. It has maintained an ‘equal-weight’ rating, while raising its target price to Rs 775 from Rs 685, citing a lower cost of equity and modest earnings upgrades. It acknowledges the improvement in asset quality metrics—Stage 2 NPAs fell from 5.6% to 5.0% and Stage 3 from 3.2% to 3.1%—but warns that the long-term credit cost trajectory remains uncertain.
The revised ECL (expected credit loss) model has boosted Stage 2 provisioning significantly, while Stage 3 coverage has been reduced, making the overall path to normalised credit costs unclear.
Morgan Stanley also highlights valuation concerns, noting that SBI Cards trades at 33 times FY26e P/E and 25 times FY27e P/E, making it one of the most expensive stocks among large-cap financials. Even on consensus forecasts, which are about 9% above its own estimates, the stock still trades at 23 times FY27e P/E.
Both brokerages agree that credit cost relief is a step in the right direction. However, while Macquarie sees further upside, Morgan Stanley believes the market may be overestimating the pace of recovery.
