SBI card valuation fair price according to Rajugine MFD

I bought at 840 at one time with 30k, and then averaged 60K..

Price fallen to 740 and then 690 and then 720 and now 709..

disclaimer: valuation not alone represnts the whole pricture try business & industry analyis.

Lets understand instric value & growth rate of SBI card as on 5th August 2024.

Relative Valuation based on PE Ratio ttm vs forward others

The range of the Relative Valuation is 394.44 – 716.85 INR.

	Range	Selected
Trailing P/E multiples	15.6x – 18.2x	16.9x
Forward P/E multiples	18.6x – 27.0x	22.9x
Fair Price	394.44 – 716.85	517.07
Upside	-44.8% – 0.3%	-27.6%

relative valuation models seek to value a business by companies to other companies, intrinsic valuation models see to value a business by looking only at the company on its own

SBICARD.NS Relative Valuation – Benchmarking P/E against peers

Forward P/E Uses projected EPS for the next 12 months to incorporate future expectations.

https://valueinvesting.io/SBICARD.NS/valuation/intrinsic-value

PEG Ratio by Peterlynch formula

SBICARD.NS Fair Value = Earnings Growth Rate x TTM EPS
SBICARD.NS Fair Value = 25 x 25.32
SBICARD.NS Fair Value = 632.92

Peter Lynch Fair Value PEG * Earnings Growth Rate x TTM EPS

According to Peter Lynch, a growth company’s P/E should equal its growth rate, so the PEG should equal to 1.

peg ratio formula

Price to Peter Lynch Fair Value

Peg x EBITDA (5Y CAGR) X EPS TTM)

instead of Earnings Growth Rate. we laso ebidta

100/25=4

book value is more important for banks. An ideal growth rate range is between 10%-20% a year

EBIDTA for non banking companies.

EV/EBITDA ratio TTM EBITDA +54% upside 1100

EV/EBITDA ratio is calculated by dividing the enterprise value by the TTM EBITDA. SBICARD.NS’s latest enterprise value is 1,051,190 mil INR. SBICARD.NS’s TTM EBITDA according to its financial statements is 60,240 mil INR. Dividing these 2 quantities gives us the above SBICARD.NS EV/EBITDA ratio.

SBICARD.NS EV/EBITDA – Benchmarking against peers

(INR in millions except Fair Price)
		Trailing	Forward
	Market Cap (INR mil)	EV/EBITDA	EV/EBITDA
SBI Cards and Payment Services Ltd	679,575	17.5x	16.9x
Sundaram Finance Ltd	469,270	38.4x	86.7x
Mahindra and Mahindra Financial Services Ltd	377,044	26.4x	67.3x
Shriram City Union Finance Ltd	148,179	19.9x	34.8x
Manappuram Finance Ltd	177,497	13.4x	20.3x
Cholamandalam Investment and Finance Company Ltd	1,163,818	41.2x	68.6x
Cholamandalam Financial Holdings Ltd	288,829	8x	10.2x
Muthoot Finance Ltd	753,809	20.8x	35.9x
Paul Merchants Ltd	2,460	2x	1.9x
IndoStar Capital Finance Ltd	30,116	3.2x	6.5x

Industry median		18.7x	27.6x
(*) EBITDA		60,240	62,045
Enterprise value		1,126,486	1,709,337

(-) Net debt		371,615	371,615
Equity value		754,872	1,337,722

(/) Outstanding shares		951	951
Fair price		794	1,407

Earnings power value (EPV)

estimate the intrinsic value of a stock under the implicit assumption that the current earnings and cost of capital are sustainable. no growth rate

weighted average cost of capital (WACC)

EPV= Adjusted earnings / WACC

72,665/11.1%= 305.10

Dividend Discount Model – Stable Growth

Range	Range	Selected
Long-term Growth Rate	2.0% – 4.0%	3.0%
Cost of equity	12.8% – 16.1%	14.5%
Fair Price	125.51 – 258.27	191.89
Upside	-82.4% – -63.9%	-73.1%

“Cost of equity” refers to the rate of return expected on an investment funded through equity. Investors and business owners use the metric to determine if a project or business investment is worthwhile

WACC – Weighted Average Cost of Capital

The Cost of Equity of SBI Cards and Payment Services Ltd (SBICARD.NS) is 14.45%.

The Cost of Debt of SBI Cards and Payment Services Ltd (SBICARD.NS) is 5%.

	Range	Selected
Cost of equity	12.8% – 16.1%	14.45%
Tax rate	25.6% – 25.6%	25.6%
Cost of debt	5.0% – 5.0%	5%
WACC	10.0% – 12.2%	11.1%