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Analyst Research Report Snapshot


State Bank of India (SBIN) - Visit Note - Dated - January 17, 2013




Axis Capital Limited


17 Jan 2013





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We met the management of SBI. Key takeaways:  Management indicated incremental slippages to be lower in Q3, while recoveries to pick up from Q4. Restructuring pipeline is not significant  NIM decline to get arrested. Confident of achieving FY13 NIM target of 3.7% as excess liquidity is tapering off  Signs of improvement in mid-corporate credit and retail loans. We upgrade our credit growth estimate for FY13-14E to 16% vs. 15% earlier  Capital infusion of ~Rs 30 bn in FY13 by government and ~ Rs 100 bn via rights issue or follow on offer in FY14/ FY15 Outlook: We expect SBI to be a key beneficiary of reforms initiated by the government, rate cuts, and capital infusion. We expect business growth of ~16% (in line with industry average) along with stable margin and high CASA ratio of ~42%. Slowdown in incremental slippages and higher growth in secured segments will reduce credit costs. We expect RoE to expand to ~19% in FY15 (17% currently), which makes the stock attractive at current levels. Valuation: We have factored in Rs 30 bn capital infusion in FY13 (2% dilution); FY14E ABV stands revised upwards by ~4%. We introduce FY15 estimates and also roll forward our TP to FY15E ABV. Upgrade to BUY with revised TP of Rs 2,850 [1.5 x FY15E ABV of Rs 1,567 (adj. for value and cost of invt) + Rs 538 value of invt] vs. Rs 2,090 earlier. Our TP implies upside of 17% from CMP of 2,433. The stock trades at 1.4x FY14E ABV of Rs 1,333 (Rs 1,277 earlier) and 1.2x FY15E ABV of Rs 1,567 (ex value and cost of investments). Regards, Praveen Agarwal (Executive Director – BFSI) Institutional Equity Research Axis Capital Ltd Tel.: + 91 22 4325 1102 Namesh Chhangani (AVP – BFSI) Institutional Equity Research Axis Capital Ltd Tel.: +91 22 4325 1127 Deepak Agrawal (VP – BFSI) Institutional Equity Research Axis Capital Ltd Tel.: + 91 22 4325 1133

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