SBI Cards and Payment Services shares: UBS upgrades rating on the stock, raises target price | Stock Market News
Source: Live Mint
SBI Cards and Payment Services shares received a ratings upgrade from foreign brokerage firm UBS as it expects improvement in the financials of the company. UBS upgraded SBI Cards stock to ‘Neutral’ from ‘Sell’ and increased the target price to ₹800 per share from ₹600 earlier.
UBS said it is witnessing signs of stabilisation in delinquencies and improvement in incremental underwriting for SBI Cards. It expects credit costs to peak in the second half of FY25 and then to decline in FY26 by 110 basis points (bps).
The brokerage firm lowered FY26 and FY27 credit costs estimates to 7.3% and 7.1%, and also tweaked margins estimates. The brokerage firm raised FY26 and FY27 Earnings Per Share (EPS) estimates by 4% and 5%, respectively.
“Over the past 3 years, SBI Cards stock has de-rated to 4.2x/21x FY26E P/BV/PE, from 9.1x P/BV, and current expectations are modest. We turn constructive, however, we will watch for sustained improvement in delinquency trends before becoming more bullish,” UBS said in a note.
SBI Cards and Payment Services’ revolver mix (% of total loans which do not make full payment on due date) has been lower at 23% at present and UBS expects a gradual increase to 25% by FY27E which will aid margins.
Moreover, declining interest rates and new NPL formation would also be margin supportive. UBS expects NIMs to increase to 11.8% by FY27E versus 11.2% at present. New card additions are estimated to accelerate in FY26E as the credit cycle turns gradually, which would likely support fee income.
SBI Cards Stock Price Trend
SBI Cards and Payment Services share price has delivered flat returns over the past 12 months, underperforming the Bank Nifty and Nifty indices. SBI Cards stock has already de-rated owing to margin pressure and elevated credit costs.
At 4.2x FY26E P/BV (21x FY26E PE), UBS believes the share price adequately prices in the improving outlook, while a sustained improvement in delinquency trends poses upside risks to consensus earnings and potential stock re-rating.
At 10:50 AM, SBI Cards shares were trading 1.68% lower at ₹743.65 apiece on the BSE.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
