Share price of State Bank of India (SBI)rised 5 per cent to highest level of Rs 197.70 on sensex. Several brokerages have cut their target price. However, they are still resilient with a ‘buy’ rating on the stock and see upside of nearly 80 per cent. This surge in market is due to the four-fold jump in the standalone net profit at Rs 3,580.81 crore reported by the bank in the quarter ended March 31. SBI share price has risen from Rs.174.05 to Rs. 149.55 which is 13.5 per cent in just three trading days. SBI’s shares have rallied 32 per cent from its 52-week low of Rs 149.55.
A brokerage firm, Ambit, said in its research report ” Strong position on liquidity with a high retail deposit base should enable SBI to analyse the current situation and maint NIMs. Further subsidiary valuations being nearly 53% of current capital base allows the bank to enhance its capital adequacy by selling a stake in subsidiaries without diluting at current valuations.”
The target price pegged by Ambit is Rs.336, which was cut down from earlier estimate set at Rs.348, and setting the current levels, the stock will have to jump 78% to touch it.
Even after today’s gain, the stock’s shares are still 47 per cent below from its 52-week high of Rs 373.70 per share. The bank declared a growth of 327 per cent in January-March quarter with its net profit rising Rs 838.4 crore.
“ COVID-19 related provisions appear low, in context of those made by peers as well as SBI’s asset quality track record.The term of SBI’s current chairman is set to end in Oct-20, this creates additional uncertainty,” HDFC Securities said in its latest research report. The brokerage firm has reduced earnings to factor in higher provisions and has also cut its price target from Rs. 316 to Rs 270.