Credit card provider SBI Cards and Payment Services (SBI Card) shares rose on BSE 6.1 percent in day business on Thursday.
It was accelerated after the global brokerage Macquerry increased the rating of this stock from ‘Neutral’ to ‘outperform’.
The stock touched a height of Rs 866.85 (the highest level in 18 months) and finally closed at Rs 859.45 with a gain of 5.23 percent. In comparison, the Sensex closed down 32 points or 0.04 per cent. Brokerage raised the price target for the stock from Rs 735 to Rs 1,000, citing industrial -wide factors that increase expectation.
Analysts in McCweri said that the previous payment rates for credit cards were somewhat stabilizing to some extent. Brokerage said in its February 12 report, ‘We cannot guess when there will be a big shortage, but this is the first relief factor. The indication is because SBI Card has started increasing loans to better scores borrowers in the last 12 months.
Apart from this, factors such as the decline in interest rates, improvement in liquidity, income tax cuts and low in unsafe loans are additional positive for SBI cards such as the Governor of Reserve Bank of India being satisfied.
McWery analysts said, ‘We have increased our price target by 36 percent for SBI cards. It has been increased from Rs 735 to Rs 1,000. We have reduced our debt costs, resulting in continuous reward (ROA) 30 basis points to 4.5 percent on assets. We have reduced the cost of equity by 100 basis points to 13.5 percent and increased the price target value from 3.4 times to 4.8 times. ‘
According to McCery, from the fourth quarter of FY 2025, the declining loans related to SBI card and the declining cost of the fund, along with the declining cost of the fund, can promote this share improvement. Earlier in January 2025, the UBS gave ‘sales’ ratings from ‘Sell’ to SBI card amid signs of improving liabilities and improving incriminating underwriting.
Brokerage, keeping in mind the improvement in ROE, the target target for this stock had increased from Rs 600 to Rs 800. UBS hopes that the loan cost will remain high in the second half of FY 2025 but will decrease to 7.3 percent in FY 2026 and 7.1 percent in FY 2027, while in FY 2025, the loan cost may increase to 8.4 percent.
First Published – February 13, 2025 | 10:26 PM IST
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