Buy State Bank of India Ltd For Target Rs. 743 - LKP Securities Ltd
Result and Price Analysis
Result and Price Analysis State Bank of India (SBIN) has delivered a stable result on operating and assets quality front. It’s reported GNPA (2.76% v/s 2.78% in 4QFY23) and NNPA (0.71% v/s 0.67% in 4QFY23) holds steady with stable PCR (incl. AUCA) of 92%. Furthermore SMA1/2 (33bps v/s 8bps) increased sequentially. The bank has witnessed better than expected advance growth (15% YoY & 1.1% QoQ) led by growth across segment and steady deposit base (12% YoY & 2.4% QoQ) sequentially with better liquidity position. Moreover the bank has reported highest ever quarterly PAT of ?169bn (v/s ?166bn in 4QFY23) on back of stable NII (Domestic NIMs: 3.47%) and lower loan provision (credit cost: 32bps). The 1QFY24 calculated ROA and ROE stood at 1.22% and 19.6% respectively; surpassing the ROE target of 15%. The bank has established total standard asset and contingent provision of ~?350bn (108bps of net advances) as on 1QFY24. With improving operating environment, ample contingent buffer (against ECL provisions) and strong growth outlook, we believe the annual ROE target of 15% is achievable in FY24E/25E. Therefore, we recommend BUY with target price of ?743.
Gazing the core
Slippages came higher but NPA ratios stable: The bank’s slippages were suggestively higher sequentially at ?77bn (v/s ?32bn) and recoveries (?36bn v/s ?42bn) were lower. Moreover, bulky write-offs (?39bn) led to sustain the GNPA ratio at 2.76% v/s 2.78% in the previous quarter. The bank’s asset quality stable sequentially as reported GNPA/NNPA/PCR ratio stood at 2.76%/0.71%/92% against 0.78%/0.67%/92% in 3QFY23. GNPA ratio of retail, agriculture, SME and corporate segment stood at 3%, 11.3%, 4.8%, and 3.4% respectively. Additionally, The Bank’s SMA 1 (?56bn, 17bps) and SMA 2 (?16bn, 5bps) have widened. Moreover, BB & below book down to 9% of wholesale book. The restructured pool came down to ?227bn (70bps of net advances) from ?243bn (76bps) in the previous quarter
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