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This article is more than 1 year old.

SBI shares gain on robust Q1 earnings; CLSA, Morgan Stanley raise target

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The share price of State Bank of India (SBI), the country's largest state-run lender, rose over one percent on Monday.

SBI shares gain on robust Q1 earnings; CLSA, Morgan Stanley raise target
The share price of State Bank of India (SBI), the country's largest state-run lender, rose over one percent on Monday after the bank reported a robust 81 percent YoY increase in net profit at Rs 4,189.3 crore in the first quarter of fiscal 2021 led by stake sale in the insurance business.
The stock rose as much as 1.59 percent to an intraday high of Rs 194.50 per share on the BSE. However, the stock soon pared gains, trading 0.76 percent higher at Rs 192.90 apiece, at 11:40 am.
The earnings of the bank beat CNBC-TV18 poll estimates as the Net interest income (NII) rose 16.14 percent YoY to Rs 26,641.6 crore while domestic Net Interest Margin (NIM) improved to 3.24 percent, registering an increase of 23 bps, YoY.
Asset quality during Q1FY21 improved as gross non-performing assets (GNPA) as a percentage of gross advances declined by 71 bps to 5.44 percent from 6.15 percent while net NPA as a percentage of net advances fell by 37 bps to 1.86 percent from 2.23 percent in the previous quarter.
Gross NPA fell 13 percent to Rs 1.29 lakh crore from Rs 1.49 lakh crore while net NPA decreased by 17.7 percent to Rs 42,703 crore from Rs 51,871 crore, QoQ.
The moratorium-2 book was at 9.5 percent of the total loan book at the end of June quarter, against 23 percent in the March quarter.
Brokerage remained bullish on the stock with CLSA and Moran Stanley increasing the target price.
CLSA
CLSA maintained a 'Buy' rating and raised the target price to Rs 270 from Rs 240 per share as it believes SBI’s results were better than expected.
“Both NII/PPOP and asset quality surprised and hence we increase our FY22/23CL estimates by 40%/6% and expect ROEs of 8.5%/11% in FY22/23CL,” CLSA said.
CLSA expects just 5 bps drop in NIMs in FY22 vs 10-15 bps earlier and that drives its 2-4 percent core PPOP increase.
The brokerage factors in Rs 15,000 crore of capital raise in FY21CL and said that current valuations were cheap and SBI offered deep value.
Morgan Stanley
Morgan Stanley maintained an 'Equal-weight' rating on the stock and increased the target to Rs 215 from Rs 205 per share. The brokerage firm is of the view that the bank had a good Q1 on better-than-expected margin, strong deposit growth, and lower moratorium.
Macroclimate is tough and will weigh on margin and asset quality in H2, it said. Morgan Stanley also raised FY21/22/23 EPS estimates by 10/5/5 percent respectively.
Nomura
Nomura said that the bank delivered a strong operating performance with sustainability being the key.
“Banks should be able to navigate the current cycle well. Overall core PPoP/Asset and a weak capital position are concerning. Current valuations of SBI look undemanding, despite weak RoE trajectory, it added,” Nomura said.
The brokerage maintained a 'Buy' rating with a target of Rs 230 per share.
Kotak Institutional Equities
Kotak Institutional Equities maintained a 'Buy' call with the target at Rs 340 per share.
"The bank reported 80 percent YoY earnings growth led by 35 percent YoY operating profit growth. Moratorium ratio not strictly comparable which is at 10 percent of loans,” the brokerage house said.
It believes that the retail book should hold up better and sees a lower-than-expected impact on the bank through COVID-19.
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