Emkay Global Maintains Buy Call on SBI Cards With Target Price of Rs 850

SBI Cards Sees Soft Growth in Key Metrics, But Remains Optimistic

Emkay Global Financial's latest research report on SBI Cards highlights a mixed set of results for the company. While overall credit issuance (CIF) growth and assets under management (AUM) growth remained soft at 6% and 2% year-over-year (YoY) respectively, this is largely in line with the company's strategy to prioritize portfolio quality. The seasonal correction in the EMI and revolver portfolios also contributed to weak net interest income (NII) growth of 3% YoY.

However, the report notes that overall spends growth remained strong due to continued momentum in corporate spends. This, coupled with lower credit costs (7.7% vs 8.2% in 3Q), enabled SBI Cards to clock largely in-line profit after tax (PAT) of Rs6.1bn and a return on assets (RoA) of 3.6%. The company expects spends growth to remain healthy going forward, but CIF growth to remain moderate, given its continued focus on portfolio quality amid emerging macro-risks from the ongoing West Asia conflict.

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Outlook and Recommendations

Despite the soft growth in key metrics, Emkay Global Financial remains optimistic about SBI Cards' prospects. The company expects strong spends growth, and hence the fee, coupled with easing asset quality stress, to drive RoA up to healthy 3.9%/4.4%/4.8% levels over FY27E/28E/29E from a low of 3.3% in FY26E. As a result, the research firm retains its BUY recommendation on SBI Cards, with a target price of Rs850, based on 4x FY28E adjusted book value/24x earnings per share.