Post it's Q2FY21 results, Prabhudas Lilladher downgraded SBI Cards & Payments to 'Accumulate' from 'Buy'. On the basis of its conservative stance, the brokerage turned cautious looking at the company's weak asset quality- credit costs (12 percent) and non-performing assets (8 percent).

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Also, Prabhudas Lilladher downgraded the target price to Rs 895 from Rs 973 earlier.

"While we assess 10 percent of book net of provisions stands under stress as at September 20-end, provision run-rate to stay elevated for H2FY21 (avg. Rs 8 billion)," said the brokerage.

The recent buoyancy in the stock's momentum and near-term erratic asset quality picture prompted the brokerage to trim the valuation multiple to 44.5x (earlier 47x) on a September FY22 P/E basis.

However, long-term prospects remain upbeat with an industry-best return profile (4.6 percent RoA/22 percent RoE over FY22-23E), said the report.

In Q2FY21, the company saw cards-in force growing 3.8 percent QoQ/16 percent YoY to 11 million buoyed by daily average new accounts acquisition retreating at 98 percent of pre-COVID levels.

"With increasing focus on retails, spends are expected to record 25 percent YoY growth translating into renewed 20 percent YoY fees and 19 percent YoY growth in receivables in FY23," said the report.

On the asset quality front, the GNPA stood at 4.3 percent v/s 1.3 percent QoQ after the Supreme Court ruling's on standstill accounts. However, the lack of direction in COVID provisions in Q1FY21 and sudden spike in provisions coupled with weak asset quality in Q2FY21 was a big disappointment, feels the brokerage.

(Edited by : Jomy)

First Published:Oct 28, 2020 3:11 PM IST