Shares of State Bank of India (SBI) are on a roll, hitting their fresh 52-week highs. On September 13, the stock hit its fresh 52-week high of ₹559.95.
The stock is up more than 21% in the calendar year 2022 so far against a 4% gain in the benchmark Sensex.
Fundamental factors favour the stock. Healthy asset quality, improving macro sentiment and an uptick in credit are boosting the stock prices.
Should you book profit?
Analysts and brokerages are positive about the stock; despite a double-digit growth this year, they believe more upside is left in the stock.
Morgan Stanley has an 'overweight' view of the stock with a target price of ₹675 which is a 21% upside from the stock's September 13 closing price of ₹558.25. The global brokerage firm is of the view that the bank's retail franchise has improved, and the corporate cycle is turning.
"As the macrocycle turns, we see upside risk to SBI's earnings from higher margins as excess liquidity decreases and rates move higher, and cost-to-income ratio and credit costs move lower," Morgan Stanley said in a report.
"The stock has done well given good asset quality performance. We expect further re-rating as PPoP (pre-provision operating profit) growth accelerates," said Morgan Stanley.
Brokerage firm JM Financial, which has a buy call on the stock with a target price of ₹660, believes SBI may deliver healthy core-PPOP growth in FY23E/FY24E (21% CAGR over FY22-24E) led by a gradual improvement in net interest margins (NIMs).
JM Financial also expects lower credit costs (0.7%/0.8% in FY23E/FY24E) and strong loan growth of 16% over FY22-24E for SBI.
"We see continued outperformance given that it is a key beneficiary of the uptick in systemic credit growth. SBI has protected its asset and liability market share over the last five years. With increasing signs of stronger corporate credit demand emerging, we see SBI as one of the best-placed banks to ride the upturn," said JM Financial.
"SBI’s core fundamentals continue to be on a strong footing and improvement in systemic growth should drive incremental re-rating for the stock in our view. Q1FY23 witnessed a blip in margins, which, in our view should normalize going ahead with the bank’s liability franchise being amongst the best in the sector," the brokerage firm added.
If we see the technical charts, SBI has been making higher highs and higher lows for the last couple of months on the daily chart.
Jigar S. Patel, Sr. Manager - Equity Research, Anand Rathi Share and Stock Brokers said one could buy the stock in small tranches at the current levels and buy another tranche at around ₹520-525 levels (if again tested). He said the upside is expected till ₹620 and support is around ₹500.
"Volume is picking up on a daily basis which is complementing its up move. Weekly RSI (relative strength index) is above 60 while weekly stochastics is in the overbought zone which further confirms upside in counter," said Patel.
Vaishali Parekh, Vice President - Technical Research, Prabhudas Lilladher highlighted that the SBI stock has recently indicated a breakout above the ₹545 level which would be the near-term support zone on the daily chart.
With the strong trend maintained, the next near-term target is around ₹570, said Parekh.
The indicators are at their highly overbought zone and around the peak level of ₹560, so there can be some exhaustion and the chances of some profit booking in the coming days cannot be ruled out.
"Investors can hold the stock keeping ₹545 as the near-term support and only a fall below ₹523-520 would weaken the trend and one can think of selling their holding. For fresh buying, if the stock touches ₹540-545 and indicates a pullback then can take new positions," said Parekh.
According to a MintGenie poll, an average of 41 analysts have a ‘strong buy’ call on the stock.
Disclaimer: The views and recommendations given in this article are those of individual analysts and broking firms. These do not represent the views of MintGenie.
