Bull vs Bear: Should you invest in SBI Card stock? Zee Business analysis suggests this!

In today's edition of BULL Vs BEAR, Zee Business' Senior Research Analyst Varun Dubey and Research Analyst Ashish Chaturvedi bring an exclusive research on the SBI Cards and Payment Services Limited's stock. The research team brings the positives and negatives of this stock along with an expert take.

Arguing for the SBI Card shares, Chaturvedi said that he remains bullish on this stock. It is the second-largest credit card company in India and is a must in the listed space if one is looking to buy a credit card company stock. If you want to buy a company that is pure play, then this is the company, he said.

Countering this, Dubey said the problem is that the business of this company has become quite outdated. No one wants to do business in the card company because there are a lot of choices now with the customers including UPI payment, 'buy now, pay later' (BNPL) etc. Apart from that the competition is also continuously increasing. It is the only credit card company in the listed space and in the coming years, it may be left as the only company to do this business, he added.

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However, Chaturvedi dismissed the bearish take saying that only 3 out of 100 people are holding credit cards in India as against 45 percent penetration in the US, which is highest in the world. This leaves strong potential for growth for this company.

Meanwhile, Dubey said that Buy Now Pay Later was a growing trend and the company was still lagging in this aspect. 

Chaturvedi retorted by saying that BNPL is also a form of credit where all SBI Card has to do is to launch an app to step in.

Chaturvedi further said the valuation of credit card business increases 3 times every 6 months. Its valuation gets double in every round. Their (SBI) business is fully set up, is running, and will continue, he added.

Dubey, meanwhile said that though the valuation of the card increases significantly, is now trading between Rs 800 - Rs 900 from an earlier range between Rs 1200-Rs 1300. This is an indication that the stock price is going down. He also said the card addition in this industry is increasing by 8.5% per day but the growth in SBI is 2%. That means SBI is not matching the growth of the industry.

Countering this, Chaturvedi said card additions have grown the fastest since August 2019. The growth is coming but people have to have some patience.

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Dubay said Goldman Sachs's target price fell by Rs 200. The target price is Rs 641 now.

But Nomura is very bullish, said Chaturvedi, the target price is Rs 1250.