Target: ₹1,075

CMP: ₹951.10

We met the management of SBI Cards and Payment Services, to understand their view on growth, margin, asset quality and rising competitive intensity in the payments business. The management re-iterated its spends/AUM growth guidance of 17-18/12 per cent, respectively, and its expectation of the cost of borrowing reducing, after the recent policy rate-cuts, which should drive-up margins.

The share of revolver rate should remain low, although the company has increased APR by 300bps to 45 per cent to partly offset the drag on margins.

While incremental stress flow rates have eased, the management would remain watchful for two more quarters (given macro-micro dislocations and elevated leverage levels), before providing any conclusive guidance. Thus, credit cost could remain elevated in the near term before easing in H2FY26 which, coupled with steady margin improvement, should drive up RoA in FY26E.

We upgrade FY26E/27E/28 earnings estimates by 6/3/1 per cent, respectively, factoring in the better margin trajectory.

We revise our target price upward by about 7.5 per cent to ₹1,075 from ₹1,000 earlier (rolling forward on 5x Jun-26E ABV/24x PER), and retain Add.

Published on June 23, 2025