Shares of SBI Cards and Payment Services plunged over 6% to the day’s low of Rs 710.50 on the BSE in Monday’s trade reacting to the not-so-optimistic view on the company’s growth outlook by a clutch of top domestic brokerages. Following SBI Card’s December quarter earnings, Motilal Oswal downgraded the stock to ‘Neutral’ while Nuvama and InCred reiterated their ‘Reduce’ ratings.

The company reported an 8% year-on-year (YoY) rise in net profit to Rs 549 crore for Q3FY2024. The pure-play credit card company, promoted by SBI, had posted a net profit of Rs 509 crore during the corresponding period of the previous financial year. Total income grew to Rs 4,742 crore during the October-December period from Rs 3,656 crore in the year-ago period, SBI Card said in a regulatory filing.

Read More: SBI Card Q3 Results: Profit rises 8% to Rs 549 crore

Here’s what brokerages recommended:

Motilal Oswal: Neutral | Target: Rs 850

Motilal downgraded its rating to ‘Neutral’ with a revised target price of Rs 850 premised on 21x September 2025E EPS. Calling its Q3 earnings “sub-par”, the brokerage held elevated provisions to be a pain point. “While we expect SBICARD to deliver healthy earnings CAGR over FY 2024-26, the disappointing earnings run-rate over the past several quarters has driven a consistent cut in our estimates along with limited near-term earnings visibility (which) keeps us watchful,” the brokerage said.

The outlook on margins remains weak due to a sharp rise in funding costs, the brokerage warned. The management has also indicated that the recent hardening of interest rates, along with the impact of risk weights, will exert pressure on funding costs in the coming quarters.

Among positives, Motilal said that the mix of revolvers and EMI loans remains stable. Spending growth remains healthy and the company sees healthy traction in new card additions.

Nuvama: Reduce | Target: Rs 760

Nuvama has retained a ‘Reduce’ rating and cut target price to Rs 700 from Rs 760 as it cuts earnings by 13% for FY25E. The credit cost rose sharply on the high base company’s PAT in Q3 missed consensus by 7%. The assets under management (AUM) grew 8% QoQ as expected, driven by festive demand.”With credit cost likely to remain high and a likely increase in CoF, the outlook remains weak,” the brokerage opined.

InCred: Reduce | Target: Rs 600

InCred has maintained a ‘Reduce’ rating on the counter and has cut the target price to Rs 500 from Rs 600. New account additions remain low and the momentum to ease further. Asset quality tends to remain volatile while the credit costs will also likely remain elevated, Nuvama opined.

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(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)

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