State Bank of India (SBI) share price has been in base building mode after climbing to its life-time high of ₹629.55 apiece on NSE in December 2022. SBI share price today is around ₹525 apiece, which is around 17 per cent lower from its record high and Motilal Oswal believes that fundamentals of the largest Indian commercial bank are strong enough and SBI shares are poised to come out of the base building mode and climb to a new peak in long term.
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Highlighting the reason for being bullish on SBI share price, Motilal Oswal said, “SBIN’s robust performance has been aided by strong loan growth, margin expansion and lower provisions. The improvement in its treasury performance (which supported other income) and controlled opex led to healthy growth in core PPOP. A high mix of floating loans, which will benefit from the re-pricing of MCLR loans, will continue to aid NII and earnings, even as the cost of deposits may see some increase. The asset quality performance remains strong with consistent improvements in headline asset quality ratios, while the restructured book remains under control at 0.9%.”
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Expecting improvement in margins of SBI, the brokerage said, “The bank believes that there is an opportunity to pass on the MCLR hike which along with lagged re-pricing of deposits, which should boost margin in the coming quarters. Quality of advances remains fairly under control, with a constant moderation in asset quality ratios. Slippages have been under control and the bank does not expect any challenges. The initial target is to bring down the NPA and SMA books on a yearly basis. The GNPA ratio in the retail segment is 0.67%, while average LTV stands at ~55-60%, and thus the bank does not expect any challenges going ahead. The focus remains on keeping the credit cost at ~50bp.”
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‘On the recovery front, since chunky recoveries are largely over, the bank expects granular recoveries going ahead. In terms of the restructured book, the bank is carrying PCR of 30% with controlled NPAs; hence, the bank does not expect any significant challenges from this book,” Motilal Oswal added.
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SBI share price target
On suggestion to long term investors in regard to SBI shares,. Motilal Oswal said, “We estimate SBIN to deliver RoA/RoE of 1.0%/17.2% by FY25. We have a BUY rating on SBIN with a TP of INR 725 (1.3x Sep’24E ABV and INR200 for its subsidiaries). SBIN is one of our preferred picks in the sector.”
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As vshare price is expected to go up to ₹725 apiece levels in long term, one can expect to get up to 40 per cent return if it buys the stock at current levels of ₹525 apiece and keeps on accumulating on every big dip.
