Target: ₹950
CMP: ₹920.00
SBI Cards and Payment Services (SBI Cards) is the second-largest player in the card industry with 19.1 per cent share in CIF and 16.6 per cent share in total industry spends. However, its market share in spends has declined over the past few years, mainly due to the moderation in corporate spends. Growth in retail spend has though remained healthy.
SBI Cards has been the beneficiary of rate cuts, as its CoF has declined by 30bp during the latest repo cuts, while further benefits are yet to be realised. With high prospects of additional rate cuts, SBICARD can see a further reduction in CoF.
We anticipate the near-term credit cost to stay elevated, although an easing in credit cost and tailwinds in margins should lead to an improvement in return ratios. Thus, we build in an improvement in RoA toward 3.8 per cent in FY26E, 4.6 per cent in FY27E and 4.8 per cent in FY28E.
With some pickup in economic activity from the current levels, we expect the tailwinds to flow into better spends and loan growth. Thus, we expect spends to clock 18 per cent CAGR over FY25-28E and loans to see about 15 per cent CAGR over the similar period.
We maintain our Neutral rating on the stock with a TP of ₹950 .