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At the CMP of Rs 33, the stock is trading at an Adj P/BV of 1.3x and 1.1x for FY15E and FY16E, respectively. With the new government stepping-up reforms and making efforts to remove the bottlenecks in the economy, we expect the economic growth to pick up going forward. Consequently, we expect the strong growth momentum seen in SIB over past few years to continue. We expect advances and deposits to grow at a CAGR of ~19% each over the forecasted period of FY14-16E.
With business further expected to grow at CAGR of 19.5% over FY14-16E; NIMs remaining stable at ~3.0% and cost-to-income ratio improving to ~45% (currently ~50%), we expect a robust PAT growth of 22.6% CAGR over FY14-16E to Rs 763 crore.
Asset quality of SIB has improved in FY14 with GNPA and Net NPA standing at 1.2% and 0.8% in FY14 against 1.4% and 0.8% in FY13, respectively (which compares favourably with peers).
On the capital adequacy front, SIB is comfortably placed to support the future business needs of the bank over the period FY14-16E. The management has stated that it does not require any Tier-I capital funding during the current year. However, it plans to raise Tier-II capital of Rs 200 crore in FY15 to fund future growth.