SBI Card Q4 results review: Brokerages remain cautious on concerns over margins and asset quality

The banal shed arsenic overmuch arsenic 4.3 percent to ₹718.10 successful intra-day deals connected Monday (April 29). The banal is presently 23 percent distant from its 52-week precocious of ₹932.35, deed connected June 13, 2023, but is inactive up astir 6 percent from its 52-week debased of ₹678.80, deed connected March 14, 2024.

The scrip has mislaid astir 3 percent successful the past 1 twelvemonth and implicit 5 percent successful 2024 YTD. However, the banal has risen 6.5 percent successful April truthful acold aft an implicit 5 percent driblet past month.

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Q4 earnings

SBI Cards and Payment Services posted an 11.05 percent year-on-year (YoY) summation successful its nett net for the March 4th of the fiscal twelvemonth 2023-24 astatine ₹662.37 crore versus ₹596.47 crore reported successful the corresponding play of the erstwhile year. The company's gross besides roseate implicit 14 percent YoY to ₹4,475 crore successful Q4FY24 arsenic compared to ₹3,917 crore successful the aforesaid play a twelvemonth ago. This was led by a leap successful its nett involvement income, which precocious 28 percent to ₹2,139 crore successful Q4FY24 vs ₹1,672 crore successful Q4FY23.

However, its plus prime for the 4th nether reappraisal did not witnesser immoderate improvement. The gross non-performing assets (GNPA) came successful astatine 2.76 percent of gross advances arsenic of March 31, 2024, arsenic against 2.35 percent arsenic of March 31, 2023. Moreover, its nett non-performing assets were astatine 0.99 percent arsenic of March 31, 2024, arsenic against 0.87 percent arsenic of March 31, 2023.

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The institution besides witnessed a flimsy diminution successful its Return connected Average Assets (ROAA), down from 5.4 percent successful the aforesaid 4th of the erstwhile fiscal twelvemonth to 4.7 percent successful Q4FY24. Similarly, its Return connected Average Equity (ROAE) besides fell from 24.6 percent successful Q4FY23 to 22.2 percent successful Q4FY24.

Q4 net review

Most brokerages remained cautious astir the banal station its March 4th results. Brokerages noted that SBI Card's absorption expects recognition costs to stay elevated successful the adjacent term, but expects an betterment successful the 2nd fractional of FY25.

Read here: Force Motors stock terms slumps 5% arsenic Q4 nett falls connected higher costs

Here's what they had to accidental astir it:

Motilal Oswal: The brokerage has a ‘Neutral’ telephone connected the banal with a people terms of ₹850, implying an upside of implicit 18 percent.

SBI Cards and Payment Services (SBICARD) reported a beardown show successful Q4 FY24, peculiarly successful its nett aft taxation (PAT), which exceeded expectations owed to little operating expenses (opex) that were astir 20 percent little than estimates. However, the company's borderline declined by 39 ground points quarter-on-quarter to 10.9 percent owed to a crisp alteration successful yields connected a quarterly mean basis. The plus prime of SBI Cards remained nether pressure, arsenic indicated by increases successful its gross non-performing plus (GNPA) and nett non-performing plus (NNPA) ratios, noted MOSL.

The brokerage revised its EPS estimates for FY25 and FY26 down by 7 percent and 8 percent, respectively, owed to expectations of crisp borderline unit and elevated recognition costs. This suggests ongoing challenges for the institution successful managing its profitability and fiscal show successful the adjacent future.

Read here: ICICI Bank: Brokerages stay bullish connected banal station Q4 earnings

"SBICARD reported a mixed 4th arsenic little opex led to an net bushed but margins and plus prime remained nether pressure. Spending maturation moderated owed to a crisp diminution successful firm spending; however, the absorption expects to retrieve this successful the adjacent term. The premix of revolvers and EMI loans remains sticky. The absorption indicated that the caller tightening successful involvement rates, on with the interaction of hazard weights and plus prime pressure, volition support backing costs elevated astatine 7 percent. The reversal successful the complaint rhythm and betterment successful the revolver premix stay the cardinal triggers, though they look to beryllium a fewer quarters distant from now," stated MOSL.

Along with a ‘Neutral’ telephone by MOSL, HSBC has besides downgraded SBI Card banal to "Reduce" and lowered the people terms to ₹650 per share, citing concerns implicit the company's nett involvement margin, costs, and plus quality. This revised people terms implies a imaginable downside of 9.5 percent. HSBC besides adjusted the net per stock (EPS) estimates for FY25-27, reducing them by 1.5-9.7 percent.

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Moreover, Nomura and Nuvama, arsenic well, person maintained their "Reduce" ratings connected SBI Card stock. Nomura acceptable a people terms of ₹640 (11 percent downside) and indicated that FY25 volition beryllium a challenging twelvemonth for SBI Card, with profitability expected to stay nether pressure. Furthermore, Nuvama has revised its people terms for the banal from ₹700 to ₹690 (4 percent downside).

UBS, connected the different hand, maintained a "Neutral" standing connected SBI Card and acceptable a people terms of ₹805 (12 percent upside). Overall, these ratings and people prices suggest a scope of cautionary and neutral perspectives connected the stock's performance, reflecting concerns astir the company's aboriginal profitability and fiscal stability.

Disclaimer: The views and recommendations made supra are those of idiosyncratic analysts oregon broking companies, and not of Mint. We counsel investors to cheque with certified experts earlier taking immoderate concern decisions.

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Published: 29 Apr 2024, 01:39 PM IST