The positives of strong revenue growth led by rising and underpenetrated payments play, highly profitable lending book and benefit of a strong parentage that can lower the origination risk are partly offset by expensive valuations, said Kotak Institutional.
The brokerage likes the space as it is one of the few areas where it sees strong growth prospects and it is bullish on SBI Cards given its strong market share.
“SBIC has delivered strong earnings growth of 40 per cent CAGR for FY2017-20 and we expect 30 per cent CAGR for FY2020-24,” said Kotak Institutional. “With a reasonably long growth runway, we see valuation premium to remain high in the medium term which, in our view, should result in lower risk to multiple de-rating and remain a solid compounder,” the brokerage said.
