Market analysts have revised their outlook on SBI after Q4 performance, lowering its target price but retaining ‘buy’ rating for its better asset profile. The revised score came on Monday after the fourth-quarter performance report was published. Brokerages cut SBI price targets post Q4 due to subdued performance in loan disbursement segment; although deposit during this quarter has significantly increased.
Although broking houses have revised their viewpoint regarding SBI, it didn’t impact the performance of its stocks. On Monday, SBI shares gained 5 percent. In Q4, SBI has registered strong performance, and its standalone profit rose to Rs 3,580.81 as against Rs 838.4 crore during the last quarter. The bank further reported a decline in NPA by 42 percent and an increase in asset quality. But it seems like, the market isn’t entirely impressed with the latest report. ICICI lowered its rating from ‘buy’ to ‘hold’, although Sharekhan maintained its rating with a revised target price of Rs 262.
What is the target price?
Leading broking houses have revised their target price for SBI. But what does it mean? Well, the target price of stock refers to the evaluation of stocks future prices; based on performance forecasts and assumed valuation multiples metrics.
It is a more reliable indicator of stock value than analysts’ reports, which is opinion based, and directional for investors to evaluate risk or rewards attached to a stock.
SBI stocks rallied after the report was published and closed at a high although it couldn’t make all the analysts happy.
“Inarguably the strongest and superior franchise on deposits, underwriting, digitisation, etc., huge potential to unlock value in subsidiaries, and operating profit at 1.7-2.0 per cent of assets will help SBI manage the stress,” ICICI Securities mentioned in it report.
ICICI Securities argued that SBI didn’t live up to the expectations under COVID-19 condition. Unlike its competitors, SBI didn’t provide loans under moratorium in value terms. Emkay Global in its report disclosed that SBI’s action regarding mortgage provisioning under moratorium as compared to other lenders is disheartening.
“In addition to this non-disclosure, lower Covid-19 provisions at 4 bps versus 30-60 bps by peers is disappointing, despite strong one-off gains,” – says Emkay Global’s report on SBI.
ICICI Securities kept its rating lowered as it fears that future stress due to COVID-19 condition and the additional liability from its recent acquisition will keep its performance muted.
The Bottom Line
SBI stocks are currently trading at 47.77 percent below its 52-weeks high and 30.52 percent above 52-weeks low. For the time, the market is maintaining a positive outlook towards its stocks and proposed conservation strategy. However, SBI rallied despite muted outlook of broking houses and closed at a high at day end.