State Bank of India (SBI) shares have been at the forefront of a comeback in the PSU banking pack on Dalal Street. SBI's shares extended their dream run further after the country's largest lender by assets beat analysts' expectations by a wide margin with its robust quarterly performance.

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Most brokerages have raised their targets for the stock after the earnings announcement, with estimates as high as Rs 750 - an upside of 30 percent from the current market price.

The stock has rewarded investors with a return of 141 percent in the past year. The management's upbeat commentary on credit growth and containing bad loans is adding to its appeal. Technically, most analysts believe the stock is poised to gain more altitude.

Here's how SBI shares have performed in the recent past:

Shares in state-run banks have outperformed their private-sector peers as well as the market in the recent past. The Nifty PSU Bank gauge - which tracks the stocks of 13 PSU lenders including SBI, Bank of Baroda and Punjab National Bank - has beaten the Nifty50, Bank Nifty and Nifty Private Bank indices by a wide margin.

SBI has outperformed most peers from the public as well as private sectors:

Can investors expect more upside in SBI shares?

Strong Q2 show

SBI's net profit for the September quarter rose 66.7 percent on-year but missed Street estimates by 1.4 percent. Its net interest income rose 29 percent, and exceeded analysts' prediction by 8.5 percent. The lender's net interest margin (NIM) - a key measure of profitability for lenders - rose by 16 basis points to 3.5 percent.

SBI's management is positive on credit growth going forward. In an interaction with CNBC-TV18, Chairman Dinesh Kumar Khara said the bank expects credit growth of 9-10 percent in FY22, and the NIM to be in the range of 3.1-3.25 percent.

“We have already registered credit growth of about six percent-plus and our international book is doing very well that is growing at 16 percent-plus. Retail is doing very well. Corporate was the only one which was pulling us down,” he said. Khara also said the bank does not see a concern with regards to its asset quality both in the corporate and retail segments.

Here are some highlights of what analysts make of the banking behemoth's quarterly performance:

Sustained improvement in asset quality

Earnings likely to stay strong with economic recovery

Slippages understated

ALSO READ: SBI Q2 profit up 67% at Rs 7,627 crore; NII beats Street estimates

A number of brokerages have raised their target price for SBI shares, positive on its asset quality visibility, containment of slippages and NIM profile, though some have suggested caution.

What brokerages say

CLSA revised its target price for SBI to as high as Rs 750. The lender continues to surprise with its performance, said the brokerage, which sees a return on equity of more than 15 percent with potential upsides.

Nomura maintained its 'buy' call on SBI but raised its target price to Rs 630, suggesting an upside of 19 percent. The brokerage's EPS estimate for FY22 is down seven percent factoring in the pension liability, which improves the FY23-24 estimates by 5-8 percent.

Jefferies downgraded the SBI stock to 'hold' from 'buy', though raised its target price to Rs 600 from Rs 550. According to the brokerage, SBI has well managed its asset quality but its slippages are understated by netting-off from recoveries.

The next leg of rerating for SBI will be led by an uptick in growth, not merely by an earnings upgrade from lower credit cost, said Jefferies, which expects the bank's superior asset quality trends to sustain, reflecting the quality of its loan book.

Morgan Stanley raised its target for SBI to Rs 680 with an 'overweight' rating. The brokerage expects a sustained uplift to SBI earnings as the macroeconomic cycle turns.

ICICI Securities maintained a 'buy' call on SBI shares after the lender's earnings announcement, but raised its target price by 9.3 percent to Rs 624.

HDFC Securities retained a 'buy' call on SBI with a revised target price of Rs 572. The lender's quarterly performance surprised positively despite fully accounting for a one-time accelerated pension cost of Rs 7,400 crore given a sustained improvement in asset quality.

ALSO READ: SBI bad loans decline; analysts expect non-linear profitability in Q3

Technical view

Hemen Kapadia of KRChoksey Securities believes SBI is in a medium- and long-term uptrend. "SBI is just getting a shade overbought on the short-term charts, indicating the possibility of the stock entering a corrective phase. A close above Rs 540 could mean a continuation of its uptrend," he told CNBCTV18.com.

ALSO READ: Experts recommend buy on SBI stock. Here's why

Kapadia suggests booking partial profits or avoiding going long in SBI now. "That is assuming that we are on the cusp of a short-term correction while the bigger picture remains unequivocally positive, indicating the possibility of a further upside notwithstanding some short-term turbulence," he said.