Representational image.Prerna Sindwani / Business Insider India
SBI Card is back near its IPO price after the recent rally
The fear of mass defaults by credit card users has come undone — only about a quarter of all customers sought moratorium.
Macquarie, in its June report, said the stock could hit ₹900 in the next one year.
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The SBI Card share price is back near its issue price after a lackluster initial public offering (IPO). In July alone, SBI Card shares have surged by nearly 20%, suggesting that the second largest credit card issuer in India is coming out of the lockdown blues.
The SBI Card share price hit a low of ₹495 in May. However, since then, it has shown an upward trend, surging by more than 50%. Analysts expect a further upside of over 20%, with a target price of ₹900.
SBI Card is scheduled to report its June 2020 quarter earnings later today.
Brokerage firm
Target price
Upside
Axis Capital
₹750
1%
Macquarie
₹900
21%
Note: Upside as compared to current price of ₹643.8 as of July 20, 12:30 PM.
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Analysts are upbeat about SBI Card
One of the reasons for SBI Card share price plummeting after the IPO was the fear of defaults due to the COVID-19 lockdown.
However, according to data provided by Axis Capital, the damage has been limited.
Period
Repayments by customers availing moratorium
March
25%
April
24%
Source: Axis Capital
According to Axis Capital report dated June 18, a quarter of the customers who availed debt moratorium have repaid their dues to SBI Card. On the corporate side, only two companies have availed moratorium.
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Another reason for analysts being bullish on SBI Card is that the Indian credit card market is underpenetrated. According to a Bank of America Securities report, India has the lowest credit card penetration at just 3%.
Credit card spends in India are forecast to cross ₹15 lakh crore (approx. $200 billion) in the next five years. This presents an immense potential to credit card companies to grow in terms of revenue as well as market share.
“We raise FY21/22 earnings per share [forecast] by 16%/9% respectively. Thus, we raise our target price by 18% to ₹900,” brokerage firm Macquarie said in a report.
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