Gautam Adani-Hindenburg saga: SBI shares trade volatile. Buy or avoid?
Adani group companies and its leading investor companies Life Insurance Corporation (LIC) and State Bank of India (SBI) have been under scanner after the US-based short seller Hindenburg Research report raised concern over debt-positioning of Indian billionaire Gautam Adani-owned companies. Despite strong Q3 results, SBI share price has remained volatile after Adani-Hindenburg issue. But, after sell off taking pause in Dani group companies on Wednesday session (7 out of 10 Adani group companies ended higher in previous session). This has triggered whether one should go for the quality banking stock like SBI, which has remained highly volatile after the outbreak of Adani-Hindenburg saga.
According to stock market experts, both fundamentals and technical chart of State Bank of India or SBI suggest strong upside movement in the stock in long term. They said that slow deposit growth in Q3FY23 won’t be a big challenge for SBI and in long term, they predicted that SBI share price may go up to ₹730 apiece levels. SBI share price today is around ₹545 apiece levels on NSE, this means one can expect around 35 per cent return in long term.
Highlighting the takeaways from recently announced Q3 results of SBI, Gaurav Jani, Research Analyst at Prabhudas Lilladher said, “The State Bank of India (SBI) saw a good quarter with core PPoP at ₹223 bn beating PLe by 5.2%, led by higher NII and other income (ex-treasury). NIM was ahead at 3.4% (PLe 3.3%). While loan growth was in-line at 3.6% QoQ, it was led by retail and SME which supported better NIM. Bank sees FY24E loan growth at 14-16%. Slower deposit growth may not be an issue in near term, as there is excess SLR of ₹3.2 trillion. Asset quality was stable QoQ although bank created std. buffer asset provision of ₹42.3bn.”
On SBI’s loan exposure in Adani group companies, Prabhudas Lilladher expert said, “While Adani group exposure is 0.88% of total loans, same is below large exposure framework (LEF) and till date there have been no issues on loan repayment or servicing. Loans are extended against operating businesses and assets that generate cash. Payments relating to loans sanctioned for under-construction projects are being made on schedule. No finance has been extended against promoter’s equity. On opex, wage revision would be provided for 36 months with a 10-12% rise which would translate to ₹5.0bn per month.”
Advising positional investors to add SBI shares in one’s portfolio, Sumeet Bagadia, Executive Director at Choice Broking said, “One can buy and hold SBI stocks for short term target of ₹575 and ₹590 apiece levels. However, one must maintain stop loss at ₹530 apiece levels while taking position in this banking scrip.”
Suggesting investors to take long position in SBI stocks, Gaurav Jani of Prabhudas Lilladher said, “We maintain our multiple at 1.6x on Sep’24 core ABV and SOTP based TP (target price) at ₹730. Retain ‘BUY’.”
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