SBI Cards shares surged more than 3% after Nuvama upgraded the stock to “Buy” from “Reduce,” citing an expected improvement in credit costs. Nuvama now sets a target price of INR 850, up from INR 620, based on a 30x PE FY26E (previously 24x). The upgrade comes after a period of earnings misses due to rising credit costs, but Nuvama believes the credit cost cycle has peaked in Q2FY25 and will start improving by Q4FY25.
Key Drivers for Optimism:
- Credit Cost Peaking: Nuvama projects that SBI Cards’ credit cost, which has risen from 5.6% in Q3FY23 to 9% in Q2FY25, is likely to stabilize in Q3FY25 and decline in FY26. The company has strengthened its risk assessment to manage delinquencies better than its peers.
- Regulatory Impact Fully Priced In: SBI Cards has already factored in the negative impact of RBI’s regulatory changes, including the loss of income from over-limit fees, which is expected to be INR 4 billion in FY25E.
- Positive Rate Cycle: Potential rate cuts from the RBI are expected to benefit SBI Cards, as its liabilities have a short duration.
SBI Cards’ stock opened at ₹741.00, reaching a high of ₹760.90 and a low of ₹735.15 during trading. The 52-week high stands at ₹817.40, while the 52-week low is ₹647.95.
As of 9:39 AM, SBI Cards shares were trading 2.83% higher at Rs 744.05.
Disclaimer: The information provided is for informational purposes only and should not be considered financial or investment advice. Stock market investments are subject to market risks. Always conduct your own research or consult a financial advisor before making investment decisions. Author or Business Upturn is not liable for any losses arising from the use of this information.
