Trading Idea: SBI
CMP: 196
Either sell around 205-210 OR on rise around 220-225;
TGT: 190*-184-174-166*-159-151-145-140*-134-125 (1-3/6M)
TSL> 215 OR > 230
Note: Consecutive closing (3 days) above 230 for any reason, SBI may further rally up to 240*-250-260* and 275-295* & 305-325*-337 in the near to long term (alternative bullish case scenario).
For SBI (Standalone):
Q4FY16 TTM EPS: 12.98 (FY:16/Actual)
Projected FWD EPS: 15.05-17.50-19.95 (FY:17-19/Estimated)
Last five years average EPS is around 16.60.
Average PE: 12
As par BG metrics and current market volatility:
Present median valuation may be around: 175 (FY:16/TTM)
Projected fair value might be around: 190-202-215 (FY:17-19/FWD)
Present BVPS: 178.31
Average PB: 1.15
Present fair value: 205
| SBIN |
EPS |
BV |
P/E |
Low |
High |
Median |
200-DEMA |
10-DEMA |
| Q4FY16/TTM |
12.98 |
178.31 |
12 |
180.46 |
167.12 |
173.79 |
209.07 |
179.3 |
| FY17/FWD |
15.05 |
196.25 |
12 |
194.31 |
179.95 |
187.13 |
209.07 |
179.3 |
| FY18/FWD |
17.5 |
215.95 |
12 |
209.53 |
194.04 |
201.79 |
209.07 |
179.3 |
| FY19/FWD |
19.95 |
237.55 |
12 |
223.72 |
207.18 |
215.45 |
209.07 |
179.3 |
The above incremental growth in EPS
is assumed keeping in mind that the stressed assets of SBI
may be at its peak at around 6.5%
GNPA (Rs.98172.80) of total loan book of around Rs.1509500 cr.
In Q4FY16, the total watch list
(doubtful loans) is around Rs.61663 cr and as par the
management, 70-30% may be turned into future
NPA, depending upon the actual economic recovery in India.
Even if, 50% of that turned sour, it
may translate another GNPA of around Rs.30830 cr and total GNPA figure may
touch around Rs.130000 cr in the coming quarters.
SBI reported a loan recovery of
Rs.1724 cr (actual recovery 1627 cr & upgradation of 97 cr) in
March quarter despite all the
efforts and its around 1.76% of GNPA amount.
On the other side, the bank
added around 4% of total loan book into fresh NPL/watch list; i.e. total
stressed assets for SBI may stands now around 10.5% of the loan book.
As par various reports, PSBS may
have around 15% stressed assets on an average (depending upon the size of
the bank/loan book) and SBI may not be an exception.
Now the big question is pace of
recovery of our economy and NPAS of the banking system. If there is uneven
or tepid recovery in the real economy, then a substantial portion of the
present "standard assets" may also fall into future NPAS.
Along with the recovery of economy,
some more cuts of the repo rate to a competitive level with other advanced
economies is necessary along with full rate cut transmission benefits to the
borrowers, specially MSME & corporates. They should get fund from the
Indian banking system at around 4-6% instead of present 10-12% and can
compete with their global peers in a viable way.
As long as we do not have
competitive global bank interest rate and our real rate of interest is high,
doing business in India with Indian bank funds may not be viable and the
present NPA mess may also be continued.
But for drastic cut in repo rate,
current inflation trajectory may not be supportive (specially for food and FMCG
and house rent/school fees etc affecting the common people) and structural
reform by the Govt is necessary apart from RBI.
In Q4FY16, actual EPS of SBI was
reported as 1.63 against street estimates of 2.47 (lagged by over 34%).
Although SBI has reported EBITDA/NII better than consensus,
it came on the back of other income and its core banking operations is not very
bright apart from retail banking.
Analytical Charts:
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