Shares of SBI Cards and Payment Services fell below their March 2020 initial public offering (IPO) price of ₹755 for the first time, closing at ₹750.50 today. The drop comes despite a year-on-year profit increase of 15% and a 22% rise in total income for the third quarter of 2023.
The company reported weaker results along with increases in gross and net non-performing assets. Several analysts have downgraded the stock due to cost pressures, elevated provisions, and lack of growth triggers. These factors have led to some market watchers anticipating continued underperformance.
Yes, Securities expects the stock to continue underperforming due to a lack of re-rating triggers. Emkay Global Financial has expressed concerns about low shares in the revolver book and the rising cost of funds (CoF), which are negatively impacting net interest margins (NIMs).
Motilal Oswal Financial, however, maintained a buy rating on the stock but revised the target price downwards. The firm cited elevated provisions and hardening interest rates causing compression in margins as well as an uncertain outlook on future funding costs as reasons for the revision.
Analysts suggest that an improved market share, normalized credit costs, and lower interest rates could potentially re-rate the stock's valuation in the future.
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