The stock of SBI Cards and Payment Services jumped 12 per cent or ₹116 in intra-day trade to ₹1,035.20, on the BSE, after it reported healthy numbers in the quarter-ended March 2021. Analysts believe SBI Cards is in a better position to handle Covid-19 challenges.

The stock, however, surrendered most of the gains due to profit taking and closed the day at ₹955.35, up 3.94 per cent, over the previous day's close of ₹919.90

The firm, on Monday, reported a net profit of ₹175 crore during Q4FY21, which is more than double against the profit of ₹84 crore reported during the corresponding quarter a year ago. However, total income remained flat at ₹2,468 crore (₹2,510 crore).

‘Uncertainty looms’

SBI Cards’ spend market-share increased in FY21 on a cumulative basis. “Owing to the pandemic, though, higher credit costs and the RBI restructuring book had to be dealt with. With a higher transactor book, yields fell in last two quarters partially offset by the declining cost of funds. Though uncertainty looms, the company is better equipped to tackle FY22,” said domestic brokerage Anand Rathi with a ‘Buy’ rating and a revised price target of ₹1,109 (earlier ₹1,091).

While the card addition, yield, spend and receivable mix remains impacted due to the pandemic, SBI Cards is now better prepared to make a calibrated journey post the experience in FY21, said ICICI Securities while maintaining the price target at ₹1,205 with a 'Buy' rating.

A gradual decline in the RBI RE book and an increase in the revolver mix, coupled with controlled funding cost, would support margins over the medium term, said Motilal Oswal, while maintaining ‘Buy’ stance with a target price of ₹1,200.

‘Provisioned adequately’

According to Axis Securities, provisions were elevated at ₹705 crore (₹643 crore towards NPA and ₹61.5 crore towards loss on derecognition of financial instrument under amortised category), including provisions of ₹297 crore towards the impact of Covid-19. “The management will continue to provide in the subsequent quarters based on the situation and believe that the company is adequately provided currently. We believe the credit costs could remain elevated in the near term given the uncertainty posed by Covid 2.0,” said Axis Securities, which maintained a ‘Buy’ with a target price of ₹1,045.

SBI Cards’s Q4FY21 earnings stood mixed as business cyclicality dampened spends traction but asset quality held up, said Prabhudas Lilladher, which reiterated its ‘Accumulate’ stance with a lowered target price of ₹1,018 (earlier ₹1,080).

However, interest rate cap, more-than-expected delinquencies and altered association with promoter are key risks, said analysts.

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