Angel Broking puts a “buy” call on State Bank of India

“During 4QFY2012, SBI’s reported standalone net profit of Rs 4,050cr as against Rs 21cr in 4QFY2011, which was ahead of ours as well as street estimates. Sign of improvement witnessed on the asset quality front, with decline in both gross and net NPA ratios on sequentially lower slippages, was the key positive from the result. We recommend a Buy on the stock with a target price of Rs 2,486.”

Outlook and valuation

“At the CMP, the stock is trading at 1.2x FY2014E ABV (adjusting for value of subsidiaries 1.1x FY2014E ABV) vis-à-vis its historic range of 1.3–2.3x and median of 1.7x.

Also, considering the bank’s dominant position and reach, high fee income, superior earnings quality and recent signs of improvement in asset quality, we recommend a Buy on the stock with a target price of Rs 2,486,” Angel Broking has stated.

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