Nomura Holdings Inc. has downgraded SBI Cards and Payment Services Ltd. to 'reduce' as the company continues to lose market share.
The brokerage also cut the target price on the stock from Rs 1,030 to Rs 700, implying a downside of about 18.32%, according to a Nomura note.
"Credit card industry growth has been moderating, though it has remained healthy, as the positive effect of the lower base wanes," the brokerage said. SBI Card's market share in spending has fallen from 19.4% in fiscal 2021 to 17.6% year-to-date.
With new competitors entering this market and private players acquiring share, the level of competition remains high, it said.
In recent years, the credit card industry's incremental sourcing continues to come from non-metro areas, younger people, and the self-employed population, according to Nomura. That's true for SBI Card.
The company's gross-to-net-performing assets ratio rose in the past financial year, due to which Nomura expects its credit costs to remain inflated at 6.5% in FY24.
SBI Cards And Payments Services Shares Decline
Shares of the company fell 1.94% to Rs 840.45 at 10.22 am compared to a 0.05% rise in the benchmark NSE Nifty 50.
The total traded volume so far in the day stood at 4.8 times its 30-day average. The relative strength index is at 31.21, implying that the stock is neither overbought nor oversold.
Of the 28 analysts tracking the company, 21 maintain a buy, three recommend a 'hold', and four suggest a 'sell', according to Bloomberg data. The average 12-month consensus price target implies an upside of 11.1%.
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