Investments in “Bluechip” stocks are considered to be safe investments since they are well-established and have performed well in the past. Such stocks also have a strong and consistent dividend payout history.
Listed below is one such Bluechip stock that one should add to their watchlist for a potential upside of up to 15 percent:
State Bank of India
With a market capitalization of Rs 6.69 lakh crores, the stocks of State Bank of India closed at Rs 749.30 in Thursday’s trading session, gaining approximately 1 percent as compared to the previous closing levels of Rs 742.35 apiece.
Recently, the public-sector bank announced its Q3FY24 results with opposing movements as far as the total income and after-tax profit numbers are concerned.
The former, on one end, rose from Rs 1.07 lakh crores during Q2FY23-24 to Rs 1.13 lakh crores during Q3FY23-24, and the latter, keeping the timeframe the same, slipped from Rs 16,648 crores to Rs 11,598 crores.
Coming onto some bank-specific ratios, there was a trim in the gross non-performing assets (NPAs) from Rs 86,974 crores during Q2FY23-24 to Rs 86,748 crores during Q3FY23-24 and the net NPA numbers, on the contrary, took an upshift from Rs 21,352 crores to Rs 22,408 crores during the same period.
In addition, the bank, historically, has kept the return ratios during FY22-23, viz, the return on equity (RoE) as well as the return on capital employed (RoCE), intact with the former reported at a decent 16.80 percent and the latter at 1.74 percent.
Having a positive outlook for the bank’s future operations, Kotak Institutional Equities, one of the well-known Brokerages based in India, gave a ‘Buy’ recommendation on the stocks of State Bank of India with a target price of Rs 850 indicating a potential upside of approximately 15 percent.
The rationale for providing such a recommendation pertains to the Bank’s outperformance compared to the other PSU Banks, valuing SBI at 1.4x book and 10x earnings for return on equity (RoE) at 15 percent. Moreover, the Brokerage believes that the PSU Bank has performed well in defending its market share on liabilities and better-than-expected underwriting.
Headquartered in Mumbai, the State Bank of India (SBI) is a public-sector banking and financial services body serving its customers through retail banking, mass banking, agricultural or rural banking, technology banking, etc.
Written by Amit Madnani
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