SBI Cards share price rallies 14% in six months; JP Morgan, Motilal Oswal see 25% more rally

SBI Cards and Payment Services share price is likely to rally up to 25 per cent from the current levels on the expectations of card spends recovery. The stock price soared 14 per cent in six months, while it has surged nearly 48 per cent since listing in March 2020. Analysts at JP Morgan Equity Research and Motilal Oswal Financial Services are bullish on SBI Cards stock and have recommended to buy the stock. The analysts at both the research firms see nearly 25 per cent upside potential in the stock. “Card spends will show a strong recovery as pent-up demand comes back with the economy reopening,” analysts at JP Morgan said.

JP Morgan Equity Research in a note said that SBI Cards has a long pathway for growth, given the parent’s liability franchise. “We believe the current premium valuations of SBI Cards can sustain as long as it continues to maintain or increase its spends market share,” it added. The research firm’s target price of Rs 1,200 values SBI Cards at a 50x FY23E P/E in-line with the trading average since listing. “We rate SBI Cards as overweight. We believe the current premium valuations of SBI Cards can sustain as long as it continues to maintain or increase its spends market share,” it added.

In Monday’s trading session, SBI Cards and Payment Services shares were trading 1.4 per cent down at 958.45 apiece, in line with a weak market. “SBI Cards & Payment Services with an outstanding card base of 11.8 million, offers a diverse product portfolio of premium, classic, shopping and travel, and exclusive and corporate cards to cater to individual and corporate needs,” said Siddhartha Khemka, Research Analyst, Motilal Oswal Financial Services. The research firm has also pegged a target price of Rs 1,200 apiece, with a ‘buy’ rating to the stock. It expects a loan book/earnings CAGR of 24 per cent/60 per cent over FY21–23E. It estimates RoA/RoE to improve to 6.8 per cent/28 per cent in FY23E.

The credit cards industry has demonstrated a strong resilience, according to Motilal Oswal, as both card spends and new customer acquisitions have reached near pre-COVID levels. SBI Cards’ spend rate has reached pre-COVID levels (more than 100 per cent in retail spends), while it has gained 50bp market share in outstanding cards. “We believe a gradual uptick in the economy, along with a higher mix of online/retail spend, would accelerate the growth momentum,” the brokerage firm said.

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