SBI sees notable correction in 2025 so far: LKP

According to LKP, the State Bank of India (SBI) has been a strong and consistent performer in the banking sector, supported by robust business growth and sustained profitability. With improved liquidity conditions and recent repo rate cuts by the government, SBI is well-positioned for long-term growth, especially as credit demand improves. The bank's favorable credit-deposit (CD) ratio, compared to industry averages, and its extensive distribution network give it a competitive edge. Additionally, the impact of rate cuts on the bank's net interest margins (NIMs) is expected to be minimal due to its lower reliance on repo-linked lending.

The bank's asset quality has also shown improvement, and this trend is expected to continue, supported by favorable macroeconomic conditions. Key indicators such as SMA 1 and SMA 2 have shown a decrease in the most recent quarter, signaling strong asset performance. Currently trading at Rs 727.75, SBI's stock is priced at 1.1x FY27E book value per share (BVPS), which is below its historical three-year average of 1.5x.

In its valuation note, LKP has assigned a "BUY" rating to SBI, with a target price of ₹890 per share, derived using a sum-of-the-parts (SOTP) approach. This target price reflects a valuation of the core bank at 1.1x FY27E BVPS and attributes ₹158 per share to its subsidiaries. With a market capitalization of Rs 6,49,489.22 crore, SBI ranks as India's sixth-largest company and the third-largest bank, following ICICI Bank and HDFC Bank.