Brokerage firm Prabhudas Lilladher has kept its 'Buy' rating on State Bank of India with a target price of Rs 1,200 following the bank's Q2 FY27 results. While the bank reported a 14.28% rise in net profit, credit growth in the first half of the year remains behind target. Investors may watch how the bank balances deposit competition with its annual loan growth goals.
Brokerage firm Prabhudas Lilladher has maintained its 'Buy' rating on State Bank of India (SBI) following the lender's second-quarter financial results for the fiscal year 2027. The firm has set a target price of Rs 1,200 for the stock. This decision comes after the bank reported a 14.28% year-on-year increase in net profit, reaching Rs 23,038 crore for the quarter.
Profitability and Margin Trends
The bank showed resilience in its core operations during the recent quarter. Its net interest margin, which represents the difference between interest earned on loans and interest paid on deposits, improved by 8 basis points sequentially to reach 2.94%.
Despite this improvement, the bank’s management has maintained a cautious outlook regarding domestic margin guidance. This reflects the competitive environment in the banking sector, where banks are fighting for deposits, potentially limiting the room to keep margins high. The management indicated that while there is potential for upside from loan repricing cycles, the bank is prioritizing a healthy liquidity buffer rather than engaging in aggressive deposit pricing.
Growth Challenges in the First Half
A key area for investors to monitor is the bank's loan growth trajectory. The bank has reiterated its guidance to achieve 14-15% loan growth for the full fiscal year. However, performance in the first half of the year reached only about 38-41% of the total annual credit growth target. This creates pressure on the bank to accelerate its lending activities in the second half of the year to meet its stated goals.
The brokerage firm notes that the bank remains confident about its growth potential, citing a strong pipeline of corporate loans and consistent demand in the retail, agriculture, and MSME sectors. To account for the current performance and market conditions, Prabhudas Lilladher has adjusted its valuation multiple for the stock to 1.3x, down from 1.4x, based on a roll-forward to the September 2028 core adjusted book value.
What Investors Should Track
For shareholders and potential investors, the primary monitorable will be the bank's ability to ramp up credit growth in the coming months. With a significant portion of the annual target still to be achieved, the execution in the corporate segment and the stability of the retail, agriculture, and MSME sectors will be critical. Additionally, investors may continue to watch for updates on deposit competition, as this will determine whether the bank can maintain or improve its current net interest margin levels throughout the rest of the fiscal year.