Shares of SBI Cards & Payments slipped on Monday after the company came out with a weak set of quarterly results but analysts remain bullish on the stock.

The result was announced after market hours on Friday. In reaction to the results, SBI Cards shares edged down 2.4 per cent at ₹548.35, down 2.33 per cent. The stock, which got listed on March 16, after the highly successful IPO in early March this year despite global uncertainity on Coronavirus impact, has slumped almost 27 per cent from issue price of ₹750. It touched a high of ₹769 on the listing date. Shares of SBI Cards plunged to a low of ₹501, within a month of listing, on April 16.

For the fourth quarter ended March 31, 2020, the company has reported drop of 66 per cent in net profit at ₹84 crore, as against ₹249 crore reported in the same period year-ago. However, for fiscal 2020, it has posted a 44-per cent increase in net profit at ₹1,245 crore (₹865 crore in FY18-19). “Excluding the Covid-19 impact, the net for FY20 would have been at ₹1,662 crore,” SBI Cards said in a statement.

SBI Cards has reported a total revenue of ₹2,433 crore for the March quarter as against ₹1,983 crore a year ago. Revenues was hurt due to fee reversal of ₹90 crore due to impact of Covid, the firm said.

Initiating a ‘buy’ call with a price target of ₹720, HSBC Global Research said, “We have been strong advocates of pitching the Indian credit card market as a compelling long-term growth story. Only three people in every 100 have a credit card in India — much lower than in other large economies — but we think factors such as the internet, mobile phones, urbanisation and government policy will drive this number up rapidly. Yes, the Covid-19 lockdown means this will be a difficult year, but we believe credit card spending will recover quickly.”

With increasing focus on retail, sticky customer base and continued OEM support, spends are expected to revive to 26 per cent y-o-y growth translating into renewed 45 per cent y-o-y growth in fees and 18 per cent y-o-y for receivables in FY22, said domestic brokerage Prabhudas Lilladher.

“While a credit card business remains a high-growth-high-return model and SBI Cards’ is expected to report robust 27 per cent RoE and 5 per cent RoA in FY22 earnings, our revised multiple at 36x (earlier 38x) stands justified. We maintain a ‘buy’ rating with a target price of ₹643 (earlier ₹646),” it added.

Retail investors exit

It may be recalled that already 4.24 lakh small retail investors — categorised as having share capital up to ₹2 lakh — had exited from the company. At the end of March 31, 2020, the number of retail investors holding stake in the company dropped to 18.94 lakh. However, big investors such as foreign portfolio investors and mutual funds have increased their stake, displaying their faith in the firm.

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