Axis Securities
SBI Cards (Buy)
Target: ₹1,010
CMP: ₹838.65
SBI Cards & Payment Services Ltd is the second largest credit card company, with a market share of 18.5 per cent and 19.9 per cent in terms of cards-in-force and spends, respectively, as of June 2020. Covid-19 and the lockdown has put pressure on spends, especially with a large portion of discretionary and travel & entertainment related spends being significantly impacted.
With social distancing norms in practice, there is a visible shift towards the use of digital payment modes, especially credit cards. We believe this preference would be sustainable and drive growth for the industry and SBIC alike.
SBIC has shown a significant improvement in the moratorium book with the accounts under moratorium reducing from 12 lakh in April 2020 to 15,000 at the end of June 2020. The moratorium book too saw drop to 6.3 per cent of receivables vs 31 per cent in April 2020, highlighting strong collections by the company.
We believe the company will be successful in weathering through these testing times on the back of attractive industry prospects, strong parentage, diversified credit card offerings and steady revenue streams and strong asset quality.
Published on October 2, 2020
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