SBI Card– Result Analysis Q1 FY20-21
CMP: 775 (As on 21-07-2020 @ 15:33)
Total income from operations at 2,152 Cr
2,432 Cr (-11.52%) YoY | 2,068 Cr (4.05%) QoQ
Year ending revenue: 9,276 Cr Vs. 7,017 Cr (32.11%)
Net Profit of 393.2 Cr
83.5 Cr (373.45%) YoY 345.6 Cr (13.91%) QoQ
Year ending Net profit: 1,249 Cr Vs. 863 Cr (44.73%)
EPS (in Rs.) 4.15
0.89 YoY | 3.71 QoQ
Year ending EPS: 13.21 Vs. 11.10
View: Result is average and below expectation. YoY topline contracted but bottom line significantly improved due to operating expenditure declined by more than 27% and impairment losses & bad debts declined by more than 42% in YoY since in previous quarter Q4FY20 Covid-19 Provision was around INR 489 Cr in books of accounts. GNPA improves by 133bps to 1.35% vs 2.68% for Q1 FY20.
Business Updates & Highlights:
Interest income increased by INR 363 Cr, or 34.6% to INR 1,412 Cr for Q1 FY21 from INR 1,049 Cr for Q1 FY20.
Income from fees and services at INR 668 Cr for Q1FY21 vs INR 916 Cr for Q1FY20 therefore declined by 27% in YoY.
Other income at INR 43 Cr for Q1FY21 vs INR 236 Cr for Q1FY20 therefore declined by 81.7%.
Finance costs decreased by INR 27 Cr, or 9.0% to INR 275 Cr for Q1FY21 from INR 302 Cr for Q1FY20. Total Operating cost decrease by INR 166 Cr, or 15.4% to INR 907 Cr for Q1FY21 from INR 1,073 Cr for Q1FY20.
Total Balance Sheet size as of June 30, 2020 was INR 24,260 Cr as against INR 25,303 Cr as of March 31, 2020.
Total Gross Advances (Credit card receivables) as of June 30, 2020 were INR 23,330 Cr, an increase of 9.9 % from INR 21,231 Cr as of June 30, 2019.
Card-in-force grew by 20% to 1.06 Cr vs 0.88 Cr as of Q1 FY20. Spends at INR 19,085 Crore for Q1 FY21 vs INR 30,174 Cr for Q1 FY20 therefore declined by 36.7%. Market share – Card-in-force at 18.3%; Spends at 19.6% (as of Apr’20)
The Gross non-performing assets were at 1.35% of gross advances as on June 30, 2020 as against 2.68% as on June 30, 2019. The Provision Coverage Ratio at 68.25% as of June 30, 2020 as against 72.00% as of June 30, 2019
Cost to Income ratio improved by 635bps to 47.2% vs 53.6% for Q1FY20
Financial
ROA and ROAE is around 6.3% and 28.3% respectively therefore declined by 11 bps and 783 bps in YoY and book value per share is around INR 38 share is currently trading at 19.3x of its book value. Debt equity ratio maintained at 2.81 times, consolidated CAR is 24.4% up by 551 bps in YoY. Company is currently trading at annualized PE of around 46 which is high as per Industry benchmark. Promoter holding (SBI) in the company is around 69.5% which is strong and stable, FIIs and mutual fund hold around 4.6% and 1.6% respectively. Net worth as of June 2020 is INR 5,722 Cr as against 5,413 Cr in March 2020.
Share View: Share price high 769 (52 week) and now 735. SBI Card was launched in October 1998 by the State Bank of India and GE Capital incorporated as SBI Cards and Payment Services Private Limited (SBICPSL). Today, with over 10 million credit cards Customers Company is the second largest credit card issuer in the country. Company has offices in over 145 cities in India extensive product portfolio, which includes premium, classic, travel and shopping, exclusive and corporate cards, to cater to both individual and corporate needs.
Share support price is INR 700/640. Long term investor should continue with the company any good correction with opportunity to add for long term.
Opportunities: 2nd Largest credit card issuer in the country. Focus on Digital Application through video KYC, & e-Sign. Grow online spends through e-comm. Partner API Integration. Despite topline corrected in this quarter company has significantly improved the bottom line for using various costs saving technique eg. Finance cost decreased by more than 9% in this quarter. Strong promoter holding (SBI) and also improved GNPA in this quarter and continuously reducing down 1.35% Vs. 2.68% Vs. 2.01% in YoY and QoQ. INR 4,978 Cr (30%) of sanctioned bank lines unutilized and available for draw down as at Jun’20. Credit ratings Short Term A1+ by Crisil & ICRA. Long term: AAA/stable by Crisil and ICRA. Online retail spends in Q1FY21 was around 56.1% which was good.
Risk: In this quarter No Covid-19 Provision as compare to previous quarter it was around INR 489 Cr. Further in case of spends category which is also declined by more than 36.7% in YoY and the major impact was seen at Travel agents, Hotels, Airline & Railways which was declined by around 78% in YoY (significant impact) this can be further continue due to Covid-19 impact is currently widening spread in all our the country. New accounts were also declined by more than 66% in QoQ and 64% in YoY due to this the membership fees has declined by more than 30% in YoY and 28% in QoQ.
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