Reduce SBI Cards, target price Rs 500: InCred Equities

InCred Equities has a reduce call on SBI Cards and Payment Services with a target price of Rs 500. The current market price of SBI Cards is Rs 673.7. SBI Cards, incorporated in 1998, is a Small Cap company with a market cap of Rs 64039.35 crore, operating in Financial Services sector.

SBI Cards and Payment Services' key products/revenue Segments include Fees & Commission Income, Interest, Other Services, Sale of services and Commission for the year ending 31-Mar-2024.

Financials

For the quarter ended 30-09-2024, the company has reported a Standalone Total Income of Rs 4555.82 crore, up 1.63% from last quarter Total Income of Rs 4482.59 crore and up 7.92% from last year same quarter Total Income of Rs 4221.40 crore. The company has reported net profit after tax of Rs 404.42 Crore in latest quarter.

The company's top management includes Mr.Dinesh Kumar Khara, Mr.Abhijit Chakravorty, Mr.Rajendra Kumar Saraf, Mr.Dinesh Kumar Mehrotra, Ms.Anuradha Shripad Nadkarni, Mr.Shriniwas Yeshwant Joshi, Dr.Tejendra Mohan Bhasin, Mr.Ashwini Kumar Tewari, Mr.Nitin Chugh. Company has Ambani & Associates LLP as its auditors. As on 30-09-2024, the company has a total of 95 Crore shares outstanding.

Investment Rationale

InCred Equities reiterates high-conviction REDUCE rating on SBI Cards with a target price of Rs 500. SBI Cards is witnessing rising stress in asset quality, with its gross non-performing assets or GNPAs increasing by 22bp QoQ to 3.27% and credit costs surging by 55bp QoQ to 9%. InCred continue to believe that SBI Cards cannot sustain its premium valuation amid rising concerns over slowing growth, increase in the cost of funds and deteriorating asset quality.

They expect SBI Cards to continue to lose market share in overall spending due to its weak capital adequacy ratio and tighter risk weights. InCred expects the cost of funds for SBI Cards to increase, despite probable monetary easing, amid an increase in risk weights

Promoter/FII Holdings
Promoters held 68.61 per cent stake in the company as of 30-Sep-2024, while FIIs owned 9.18 per cent, DIIs 16.75 per cent.