Buy State Bank of India; target of Rs 910: Prabhudas Lilladher

Buy

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Prabhudas Lilladher's research report on State Bank of India

SBI reported a good quarter; while NIM was in-line, core PPoP was materially higher due to lower staff cost as provision on wage revision was much lower at Rs7bn (guidance Rs54bn). One-time wage provision included in employee expenses for FY24 was Rs134bn and staff cost for FY25 could normalize to Rs638bn. LDR improved by 1.4% QoQ to 75.3% and there is more headroom to increase LDR. As per bank, loan growth of 13-15% can be easily achieved given excess SLR, adequate LCR and sufficient capital position that can fund growth of Rs7trn. Compared to PSU peers, SBI is better insulated to absorb RBI provision requirements relating on ECL & project financing as (1) buffer provisions are Rs323bn (2) project exposure at 3.3% is lower and (3) earlier ECL estimate of Rs300bn would be revised downward due to improved credit quality.

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Outlook

We remain positive on SBI although valuation has touched 1.3x given recent run-up, which limits upside. Rolling forward to Mar’26 ABV, we tweak multiple to 1.5x and raise SOTP based TP to Rs910 from Rs770. Retain ‘BUY’.

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