The brokerage cut the price target on SBI to ₹742 from ₹841, implying a downside of 5.3% from Friday’s closing price of ₹783.90. The stock fell 4.3%.
On Vi, it maintained its sell rating, while raising the price target to ₹2.5 from ₹2.2, implying a downside of 81.4% from Friday’s closing of ₹13.43. Vodafone shares plunged 11% on Friday.
State Bank of India
Goldman said the risk-reward profile for SBI is turning unfavourable for the bank citing pressure on profitability, lower loan growth and likely increase in credit costs.
“Historically, whenever credit concerns have risen, cost of equity has inched up. In this cycle, if rural distress were to compound, coupled with potential farm loan waivers, the cost of equity would start inching up,” said the brokerage in a client note dated September 5. “However, we see limited scope for ROE to expand on compression in NIMs and increase in credit costs, thereby putting multiples under pressure.”
SBI shares are up 37% in the past year and 82% in the past three years.
Vodafone Idea
Goldman said it maintained the sell rating on the company due to a lack of clarity on the telecom company’s path to positive free cash flow and recovery in its market share.
Analysts at other brokerages had turned bullish on the company after Vodafone Idea’s ₹18,000-crore follow-on public offer (FPO) in April was lapped up by global institutional investors.
Goldman said there is a direct correlation between capital expenditure and revenue market share. Since Vodafone Idea’s peers are likely to spend at least 50% more than the company in capex, Vodafone Idea’s market share could witness a loss of another 300 basis points in the next 3 to 4 years, it said.
“We estimate Vodafone Idea’s net debt-to-EBITDA (earnings before interest tax, depreciation and amortisation) will remain elevated at 19 times by Mar ’25, and we continue to expect its balance sheet to remain stretched even after potential government conversion of near-term dues into equity,” said the brokerage’s analyst in a client note dated September 5.