Brokerage Firm Goldman Sachs Reduced Its Target On This Government Share; What’s Next?

If you have SBI (NSE: SBIN) share or are going to buy them, then this news is very important for you.

A top brokerage firm has also reduced its target on SBI from ₹ 841 to ₹ 742. After this news, State Bank shares fell 1.84 percent to Rs 803.50.

According to news, a top brokerage believes that SBI may face many challenges going forward, as its return on assets (ROA) is at its peak and the brokerage expects a reduction in the valuation of India’s largest lender.

Risk-Reward Profile ‘Unfavourable’

SBI’s risk-reward profile has turned ‘unfavorable’ as the bank’s ROA sustainability is facing ever-growing issues, Goldman Sachs wrote in its note.

The brokerage expects SBI’s ROA to decline from a peak of over 1% in FY24 to below 1% by FY26.

It also predicts a decrease in growth in loan volume going forward due to the increasing gap between the bank’s deposits growth.

Earnings Per Share Forecast Reduced By 3 Percent

The brokerage wrote in its note that the deterioration in MSME agricultural and unsecured portfolios could lead to an increase in costs for credit.

Because of these headwinds, the company has cut its earnings per share estimates for FY25-27 by 3%-9%.

The company has increased its target multiple from 1.2x to 1x, up from 1.2x before the change.

However, on the other hand, 49 analysts covering the State Bank of India, and 38 have a “Buy” rating on the stock. 6 analysts have stated “Hold” and 5 analysts with a “Sell” rating on the stock.

Quick Fact

Company name | SBI

Brokerage firmGoldman Sachs
Previous possible target price₹841
New possible target price₹742
Stock movementFell by 1.84%
Current stock price₹803.50
ROA sustainabilityFacing issues
Expected ROA decline (FY24-FY26)From over 1% to below 1%
Loan volume growthExpected to decrease
Deposits growth gapIncreasing
Risk-reward profileUnfavorable
EPS forecast reduction (FY25-27)3%-9%
Target multipleReduced to 1x
Analysts covering SBI49
Analysts with “Buy” rating38
Analysts with “Hold” rating6
Analysts with “Sell” rating5

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