The share price of State Bank of India (SBI) has been steadily increasing since reaching a record high of $629.55 per share on the NSE in December 2022. SBI shares are currently trading at around $525 per share, which is about 17% below their all-time high. According to Motilal Oswal, the largest Indian commercial bank’s fundamentals are sufficiently solid, and SBI shares are ready to exit the base-building phase and reach a new high in the long run.
Motilal Oswal highlighted the factors that contributed to his optimism regarding the price of SBI shares by stating that “SBIN’s solid performance has been bolstered by strong loan growth, margin expansion, and lower provisioning. Core PPOP experienced good growth as a result of its improved treasury performance (which boosted other income) and managed opex. Even if the cost of deposits may go up slightly, a large mix of floating loans—which will profit from the re-pricing of MCLR loans—will continue to support NII and earnings. While the restructured book remains in check at 0.9%, the asset quality performance continues to be solid with steady improvements in headline asset quality measures.
The brokerage predicted an improvement in SBI’s margins, stating that the bank “believes there is an opportunity to pass on the MCLR hike which together with lagged re-pricing of deposits, should boost margin in the coming quarters.” Advancement quality is still largely under control, and asset quality ratios are consistently being moderated. The bank has been able to keep slippages under control and does not anticipate any difficulties. The initial goal is to reduce the NPA and SMA books annually. With an average LTV of between 55 and 60% and a GNPA ratio in the retail market of 0.67%, the bank does not anticipate any difficulties in the near future. The goal of maintaining the credit cost at 50 bps has not changed.
‘On the recovery front, the bank expects granular recoveries moving forward since chunky recoveries are largely done. With managed NPAs and a PCR of 30% for the restructured book, the bank does not anticipate any major issues from this book, Motilal Oswal continued.
SBI share price target
on a recommendation to long-term investors on SBI shares. According to Motilal Oswal, SBIN will produce RoA/RoE of 1.0%/17.2% by FY25. With a TP of INR 725 (1.3x Sep’24E ABV and INR 200 for its subsidiaries), we have a BUY rating on SBIN. One of our top options in the industry is SBIN.
If one purchases SBI stock at its present price of 525 per share and continues to add to their holdings on significant dips, they may expect to receive returns of up to 40% over the long term as the share price is predicted to increase to levels of 725 per piece.
