SBI share price may give up to 40% return in long term, says Motilal Oswal

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After reaching a record high of $629.55 per share on the NSE in December 2022, the share price of State Bank of India (SBI) has been in base-building mode ever since. The current price of SBI shares is around $525 per share, which is around 17% below its all-time high. According to Motilal Oswal, the largest Indian commercial bank’s fundamentals are solid enough for the stock to emerge from its base-building phase and reach a new high over the long run.

Motilal Oswal outlined the rationale for his optimism on the price of SBI’s shares “Strong loan growth, margin expansion, and fewer provisions have all contributed to SBIN’s outstanding performance. Core PPOP experienced good growth as a result of its improved treasury performance (which boosted other income) and managed opex. Even if the cost of deposits may go up slightly, a large mix of floating loans—which will profit from the re-pricing of MCLR loans—will continue to support NII and earnings. With steady increases in the headline asset quality ratios, asset quality performance has been good, and the restructured book is still being managed at 0.9%.”

SBI’s margins should improve, the brokerage said “The bank thinks there is a chance to pass on the MCLR increase, which, coupled with lagging deposit re-pricing, should increase margin in the upcoming quarters. Advancement quality is still largely under control, and asset quality ratios are consistently being moderated. The bank has been able to keep slippages under control and does not anticipate any difficulties. The initial goal is to reduce the NPA and SMA books annually. With an average LTV of between 55 and 60% and a GNPA ratio in the retail market of 0.67%, the bank does not anticipate any difficulties in the near future. The goal of maintaining the credit cost at 50bp has not changed.”

‘On the recovery front, the bank expects granular recoveries moving forward since chunky recoveries are largely done. With managed NPAs and a PCR of 30% for the restructured book, the bank does not anticipate any major issues from this book, Motilal Oswal continued.

Target price for SBI shares
About a recommendation to long-term investors on SBI shares. Added Motilal Oswal: “By FY25, we anticipate SBIN to deliver RoA/RoE of 1.0%/17.2%. With a TP of INR 725 (1.3x Sep’24E ABV and INR 200 for its subsidiaries), we have a BUY rating on SBIN. One of our top picks in the industry is SBIN.”

If one purchases SBI stock at its present price of 525 per share and continues to add to their holdings on significant dips, they may expect to receive returns of up to 40% over the long term as the share price is predicted to increase to levels of 725 per piece.

Disclaimer: Currency Veda does not endorse the opinions or suggestions expressed above by specific analysts or brokerage firms. Before making any financial decisions, we suggest investors to consult with licenced professionals.