best stocks buy 2022

State Bank of India is well poised to sustain the growth momentum

CMP: INR446 TP: INR600 (+35%) Buy

Motilal Oswal has recommended a buy of SBI.

Digital penetration improving; remains watchful of rising rate environment

 State Bank of India (SBIN)’s Annual Report highlightsthe strong progress that the bank is making in fortifying its balance sheet and restoring RoEs back to the longterm average of 15%. The focus remains on building a superior loan book, while maintaining strong underwriting as evident in its lower stressed assets and high PCR.

 Corporate segment reported ~5x YoY jump in PBT to INR270b, underscoring the structural improvement in corporate business. The segment thus contributed ~51% of total profits in FY22 v/s 17% in FY21. Retail PBT grew 33% YoY in FY22 v/s 48% YoY decline in FY21, adversely affected by pandemic-induced provisions.

 On the digital front, YONO continued to set new records with ~112m downloads and ~48m registered users, along with average daily logins of ~16.6m as of FY22. SBIN sanctioned 1.14m digital loans worth INR211b in FY22 and overall, 36% of its retail asset accounts and 63% of SA accounts were opened through YONO in FY22.

 SBIN reported further improvement in asset quality with PCR improving to 75% (85% on the corporate book) in FY22. Controlled restructuring (1.1%), low SMA pool (13bp) and 100% coverage on SR portfolio provide comfort and would drive a sustained reduction in credit cost. We reiterate BUY with a TP of INR600.

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