Emkay Global has revised its outlook for SBI Cards, setting a target price of Rs 750. While the company reported a sharp rise in profit to Rs 7.7 billion, investors are watching the 2-3% decline in total receivables and the pressure from rising funding costs. The company is now looking toward a festive season recovery to drive future growth.
Emkay Global has set a target price of Rs 750 for SBI Cards and Payment Services. The brokerage’s update follows the company’s recent performance, which showed a profit of Rs 7.7 billion—a 75% increase compared to the same period last year. This profit jump was largely driven by a decline in credit costs, which refer to the money set aside by the company to cover potential loan losses. These costs dropped to 5.6% from 6.5% in the previous quarter.
Investors should monitor the company’s growth momentum closely. Despite the strong profit figures, SBI Cards saw a 2% to 3% decline in its assets under management—the total value of loans given out—and total receivables compared to last year. This dip has been attributed to a high base effect from previous years and a shift in the timing of the festive season. Additionally, there are signs of softening activity, with corporate card spending falling by 12% year-on-year, while the rate of customers carrying over credit card debt remained flat at 22%.
The company’s management is aiming for a recovery in the third quarter, banking on increased festive shopping and higher use of equated monthly installments to boost loan volumes. However, there are broader concerns that investors should keep in mind. Rising funding costs—the interest the company pays to borrow money—are putting pressure on profit margins. Even as the company works to improve how it manages its borrowing, this cost pressure remains a factor to watch.
For investors, the key to the future will be whether the company can successfully drive growth in receivables during the upcoming peak festive season to offset these challenges. The brokerage’s outlook suggests that while asset quality concerns have stabilized, the company's ability to maintain profitability amid higher borrowing costs and shifting spending patterns will be a significant monitorable in the coming quarters.