This PSU Banking Stock Is Top Pick By KR Choksey, Suggests Buy For 18% Gains

KR Choksey has given a "buy" call to the State Bank of India (SBIN) in its November 2022 Top Idea Picks stocks. The brokerage suggests "buy" SBIN for a potential upside of around 18% from its current level with a target price of Rs 700 per share. SBIN offers a wide range of products and services through its various branches and outlets, joint ventures, subsidiaries, and associate companies. Since it is the market leader in the Indian banking industry, the bank's performance is an indicator of the Indian economy.

Stock Outlook & Return

On Friday, 04 November 2022, the stock last traded at Rs 593.70 per share on NSE. On November 4, 2022, the stock touched its 52-week high level of Rs 596.95; the stock is currently trading at its 52-week high level. Its 52-week low level is Rs 425, which it hit on 08 March 2022. SBIN is India's largest PSU bank having a market capitalization of Rs 5,30,077 crore.

It has given 4.06% positive returns in the past 5 days. The stock gave 11.5% positive returns in 1 month and 11.38% in 3 months, respectively. It gave 11.97% in a year, 88.98% in 3 years and 82.75% in 5 years, respectively.

 

 

Strengthening its balance sheet

SBIN has positioned itself as one of the best-in-class players in the liability franchise market. With strong brand equity and a broad presence in India through its branches, the bank has a robust customer base for its deposits. We expect to see a strong CASA mix focusing on the retail segment. SBIN will continue to aim at increasing the CASA ratio with an improved focus on the current account growth and, simultaneously, maintain its leadership position in the savings and overall deposits portfolio. The bank's largest segment is retail and digital banking in terms of the loan portfolio. The bank expects the retail lending segment to be strong, aided by robust growth in the Xpress credit segment. With a continuous stream of technology driven innovations, it has always been at the forefront of the digital banking industry. SBIN will continue to see strong traction on the credit growth front, led by an improved corporate CAPEX cycle and robust momentum in retail, especially the home loans & Xpress credit segment. SBIN will strive to strengthen its overall balance sheet and enhance its asset and liability mix to maintain its margins at a sustainable level. The loan book is expected to sustain its double-digit growth with strong traction across all segments, especially the retail portfolio. We expect the loan book to grow at 13.2% CAGR over FY22-24E while deposits grow at 11.7% CAGR.

Improvement in asset quality

SBIN's asset quality has steadily improved over the years. The fall in slippages has been sharp for the bank, owing to strong recoveries and upgrades. We expect the slippages to remain moderate in the upcoming quarters. The bank is well-capitalized to withstand any additional risk on its portfolio as a result of uncertain circumstances. We expect the stress on the book to see further moderation, resulting in healthy earnings growth over the next two years.

 

NIMs will remain resilient

SBIN has a ~70.0% floating portfolio which is beneficial to the bank in terms of maintaining a stable NIM trend. The bank has also been increasing its current CASA ratio, which is ~44-45%. The higher floating portfolio & the improving CASA ratio will support margins.

"We believe SBIN is better placed than its PSU peers to manage the uncertainties, given its size & leadership in the banking system. We value the bank at 1.4x FY24E P/ABV on an ABV of INR 387.6 per share, and the subsidiaries value at INR 157 per share. We revise our target price to INR 700 per share, with an upside of 17.4%. We maintain our "BUY" rating on the shares of SBIN," the brokerage has said.

Disclaimer

The stock has been picked from the brokerage report of KR Choksey. Greynium Information Technologies, the Author, and the respective Brokerage house are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before making any investment decision.