MUMBAI: CLSA has raised target price on State Bank of India to Rs 310 from Rs 270 and retained buy rating saying that it is a deep value opportunity. Here are the top 5 reasons to buy SBI‘s stock, according to CLSA:
1) Asset quality
CLSA said the bank is relatively better
positioned on asset quality post-Covid-19, driven by high government/PSU share in loan book. This has led to better-than-expected
morat-2 performance and drives management comfort on current CET-1, said CLSA.
2) Market share
CLSA said SBI is government-owned and this reflects in sticky cost ratios and faster monetary transmission. Unlike peer PSU banks that have lost share to private banks, SBI has gained or maintained share in retail assets, CASA, overall loans, and deposits through the last decade, leading to more than a 10 per cent CAGR in core pre-provision operating profit in the past five to ten years, said CLSA.
3) Balancing national/minority interest
CLSA said the bailout of YES Bank shows the ability of the government and SBI to balance national interest versus minority interest.
4) Best-in-class subsidiaries
All SBI subsidiaries have compounded by a 25-40 per cent rate over the last three to five years and have become market leaders, driven by SBI’s distribution strength, said CLSA. Subsidiaries’ contribution also ensures that capital raising is not book-dilutive like other PSUs, said CLSA.
5) Undemanding valuations
CLSA said that current valuations are undemanding at 0.3 times June-2022 book and that return on equity is likely to normalize to more than 10-11 per cent post Covid-19.