SBI Cards - Pain Nearing End But Not Over Yet: Motilal Oswal

Motilal Oswal Report

SBI Cards and Payment Services Ltd. is the second-largest player in the card industry with an 18.5% share in CIF and 15.9% share in total industry spends. However, its market share in spends has declined over the past few years, mainly due to the moderation in corporate spends. Growth in retail spend has remained healthy.

With potential rate cuts on the horizon and the recent moderation in the 91-day T-bill rate, SBI Card is poised to benefit from a reduction in CoF.  The stock has seen significant de-rating over the years and now trades at 4.3 times FY26E book value and 21 times FY26E EPS, which is close to a few other NBFCs that are generating the similar RoA.

We anticipate near-term credit cost to stay elevated; however, the moderation in CoF and a gradual improvement in asset quality should boost earnings growth to 35%/33% over FY26E/FY27E vs. avg. earnings growth of ~8% over FY23-25E.

We remain watchful on near-term delinquencies and the broader stress in unsecured segments as indicated by many other lenders. Maintain Neutral with a revised target price of Rs 850 (23 times FY26E EPS).

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