SBI Cards Q4 Results Review - Low Opex Aids Earnings; Credit Cost Stays High: Motilal Oswal

Motilal Oswal Report

SBI Cards and Payment Services Ltd. reported a healthy beat on profit after tax in Q4 FY24 amid lower opex (20% lower than our estimate). Profit after tax jumped 21% QoQ to Rs 6.6 billion, while net interest income inched up 2% QoQ (in line).

Margin declined 39 bp QoQ to 10.9% on the back of a sharp decline in yields on a quarterly average basis. The share of revolver mix improved to 24% versus 23% in Q3, while EMI mix declined to 37% versus 38% in Q3.

Spending growth decelerated by 18% QoQ, as corporate spending declined 35% YoY after recent RBI guidelines. Retail spending, however, grew 25% YoY.

Asset quality remained under pressure, with gross/net non-performing asset ratios increasing 12 bp/2 bp QoQ to 2.76%/0.99%. The drop in corporate spending led to a decline in overall opex, and as a result return on asset/return on equity improved to 4.7%/22.2%.

We further cut our FY25E/FY26E earnings per share by 7%/8%, factoring in sharp margin pressure and elevated credit costs. We maintain Neutral with a target price of Rs 850 (premised on 20 times FY26E EPS).

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