SBI Cards and Payment Services saw a decline of over 3 percent in its shares as brokerages expressed caution following the company’s Q4 results, which exhibited a mixed performance. Despite lower operating expenses contributing to strong earnings, margins and asset quality remained under pressure.
As of April 29, SBI Card shares were trading at Rs 738 in early morning trade, marking a decrease of more than 3.5 percent since the beginning of January this year.
HSBC downgraded the rating on SBI Card stock to ‘Reduce’ and reduced the target price to Rs 650 per share, citing concerns regarding net interest margin, costs, and asset quality. The revised target price implies a nearly 12 percent downside from the current price. Additionally, the brokerage lowered the earnings per share (EPS) by 1.5-9.7 percent for FY25-27.
While Nomura and Nuvama have maintained their ‘Reduce’ ratings on the stock, Motilal Oswal and UBS have retained a ‘Neutral’ call.
Nomura, with a target price of Rs 640, mentioned that FY25 could be challenging for SBI Cards, anticipating continued pressure on profitability.
UBS set a target price of Rs 805 for SBI Cards, whereas Nuvama reduced its target price to Rs 690 from Rs 700.
SBI Card’s management foresees elevated credit costs in the near term, albeit with an expected improvement in the second half of FY25, according to brokerages.
Motilal Oswal, with a target price of Rs 850, highlighted that recent interest rate tightening, along with pressure on risk weights and asset quality, would keep funding costs elevated at around 7 percent. SBI Cards reported a 7.4 percent cost of funds for Q4 FY24.
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