Fundamental Radar: Good news for SBI shareholders. This brokerage firm sees fresh record highs in 1 year

(), the largest with one-fourth market share, hit a fresh record high in the run-up to its results on November 5 this week, but the rally may not be over yet, suggest experts.

The public sector bank hit a fresh record high of Rs 586 on 25 October. It has rallied nearly 2% in a week, and over 8% in a month.

SBI is one of the strongest stocks in the banking space and is expected to report strong results for the quarter ended September this week on 5 November.

The stock is available at reasonable valuations, and long-term investors who are looking to add banking stocks can look at SBI for a target above Rs 600 in the next 12 months, suggest experts.

SBI has demonstrated strong improvement in asset quality over the past few quarters. Fresh slippages have moderated to a low of 1%, beating private peers, while the Provisioning Coverage Ratio (PCR) has improved to 75%.

Improved PCR, coupled with controlled restructuring and low Special Mention Accounts (SMA) book will drive a sustained reduction in credit cost to 0.8% for SBI which is our top pick,” Sneha

, AVP, Fundamental Research, , said.

“We have already seen strong numbers from various large banks and expect SBI to report robust numbers on November 5th. In Q2FY23, we expect SBI to report healthy 19% YoY loan growth, with margins improving to ~3.1%,” she said.

Strong retail growth along with a pick-up in the SME/Corporate book will support the loan growth. Stable margin, deployment of liquidity, and reversal in the rate cycle as ~75% of loans are floating in nature, will enable recovery in the net interest income (NII), she added.

“SBI has one of the best liability franchises with CASA mix of ~45%, which puts it in a better position to manage funding cost in a rising rate regime,” highlighted Poddar.

She further added that SBI is available at a reasonable valuation of 1.4x FY24 Adj P/B with high growth visibility of ~30% earnings CAGR over FY22-24.

“Currently, we have a target of Rs 625 which is likely to get revised post its results,” she recommends.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)

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