Payment Terms

SBI Cards share price: Buy SBI Card, target price Rs 1530: HDFC Securities

Securities has a call to buy on Ltd. with a target price of Rs 1530. The current market price for SBI cards and payment services is Rs 738.45. The period given by the analyst is one year when the price of Payment Services Ltd. can achieve the set goal.

SBI Cards and Payment Services Ltd., incorporated in 1998, is a small capitalization company (having a market capitalization of Rs 69800.02 Crore) operating in the financial services sector.

The main products/revenue segments of SBI Cards and Payment Services Ltd. includes interest, fees and other charges, other services, service charges, commissions and income from the sale of stocks and securities for the year ending March 31, 2021.

finance

For the quarter ended 31-03-2022, the company reported total standalone revenue of Rs 3016.10 Crore, down -3.94% from last quarter, total revenue of Rs 3139.66 Crore and up 22.20% compared to the same quarter last year. Total income of Rs 2468.14 Crore. The company reported net profit after tax of Rs 580.86 Crore last quarter.

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Investment rationale
SBI Cards reported earnings 17% higher than our estimate due to lower than expected provisioning (3.3% net credit costs) as the stress pool continued to shrink (GS II/GSIII at 8 .5%/2.2%). Commercial momentum continues to gain ground in terms of CIF (+17% YoY), unit spend (+32% YoY) and unit receivables (+7% YoY) leading to revenue growth of commissions (+28% over one year). However, NIMs remained under pressure at 13% (200bps below pre-Covid levels) with a sub-optimal share of revolving loans at 25% (Q4FY20: 40%). The share of revolving loans continued its downward trend and remains a key controllable element to generate higher revenue per card. While the recent RBI credit card guidelines are likely to have negligible impact on the company’s wallet, potential MDR cap regulations for credit cards remain an overhang, although the brokerage says that SBI Cards has adequate profitability offsets. It changes FY23/24 earnings estimates by 3/1% to account for the lower share of revolving loans, partially offset by higher fee income (higher spend per card), and maintains the purchase with a revised target price of INR 1,246 (38x FY24 EPS)



Promoter/Fii Holdings
The promoters held 69.59% of the company’s capital as of March 31, 2022, while the FIIs held 9.53% and the DIIs 12.41%.

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