Analyst's corner

SBI
Reco Price: Rs 3,094,
Target Price: Rs 3,500

SBI has witnessed strong loan book expansion of 20 per cent last year. Key drivers have been robust branch addition in past three years and the new-found aggressiveness with respect to retail loans. IIFL estimates SBI’s advances to grow by 20 per cent in 2010-11. Its NIM would remain stable in the medium-term driven by a stronger credit demand.

The recent deposits and lending rate hike would have a net negligible impact. NPL (non-performing loans) risk is the highest for SBI with net NPLs comprising 16.5 per cent of networth. SBI requires additional provisioning of about Rs 2,800 crore to reach the stipulated 70 per cent by Sept 2011. It expects SBI’s balance sheet to witness 18.5 per cent CAGR growth over FY10-12. Maintain buy.

—IIFL

JSW STEEL
Reco Price: Rs 1,197,
Target Price: Rs 1,372

By March 2011, the company’s consolidated debt-equity is expected to decline to 0.7:1 from 1.7:1 in March 2010. JSW has cut its 2010-11 crude steel volume guidance from 7 mt to 6.5 mt due to subdued demand from construction and real estate segments. Soft iron ore prices could lead to Ebitda per tonne of $180. Shipments of iron ore and coking coal from JSW’s Chile and US mines, respectively, are expected to begin in 2010-11.

The company has planned capex of Rs 12,000 crore to set up a 3 mt per annum greenfield HR steel capacity in West Bengal. Maintain buy.

—Edelweiss Securities