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Target: ₹1,350
CMP:₹850.25
SBI Cards and Payment Services (SBIC) has reported impressive Q3-FY22, with PAT ₹390 crore, indicative of stronger recovery. SBI Cards appears well positioned for stepping up further given: rising spends momentum (up over 25 per cent q-o-q); improving card in force (above 4 per cent q-o-q); industry leading spend active rates; sustained investments; and provision buffer build up.
The recent underperformance is due to an overhang of regulatory actions, impending RBI’s discussion paper. However, regulations might not be onerous on credit cards, given the nature of products.
Also, levers to mitigate impact (if any) will hold SBIC in good stead. We view SBI Cards as a concept stock offering high-growth and high-returns, a rare combo.
Covid has disrupted momentum, but it has also shown business resilience. This qualitatively sets a base and will spur growth progressively. We expect SBI Cards to deliver an EPS CAGR of over 45 per cent through FY21–24, translating to over 6 per cent/25 per cent RoA/RoE.
RBI’s discussion on payment products remains an overhang. Maintain Buy with a target price of ₹1,350 (unchanged).
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