5 days ago
Jefferies Initiates Buy Coverage on SBI Funds, Targets Upside
Jefferies is a brokerage that studies companies and their shares.
It started covering SBI Funds and said investors should consider buying the stock.
Jefferies set a target price of Rs 710, which it says could be 26% higher than the current price.
The brokerage believes SBI Funds benefits from its connection with SBI.
SBI’s large branch network and customer base could help the fund manager attract more money.
SBI Funds also operates with lower costs than some competitors.
Jefferies expects the company’s mutual fund assets and revenue to grow in the coming years.
The company is also preparing new investment products for wealthier customers.
Jefferies initiated coverage of SBI Funds with a Buy rating and a Rs 710 target price, implying 26% upside.
The target is based on 40 times September 2028 estimated operating profit after tax, matching HDFC AMC’s valuation multiple.
SBI accounts for 35% of SBI Funds’ equity assets under management, compared with 8% for ICICI AMC and 6% for HDFC AMC.
Jefferies expects SBI Funds’ mutual fund average AUM to grow 13% annually and closing AUM to grow 18% between FY26 and FY29.
SBI Funds plans to expand into PMS, AIFs and SIFs, including a mutual fund-only PMS product with a Rs 25 lakh ticket size.
- Who
- Jefferies and SBI Funds.
- What
- Jefferies initiated coverage of SBI Funds with a Buy rating and a Rs 710 target price, implying 26% upside.
- Where
- When
- The forecasts cover FY26 to FY29, while the target valuation uses September 2028 estimates.
- Why
- Jefferies cited SBI Funds’ parent-bank advantages, lower operating costs, improving scheme performance and expected asset growth.
Key facts
- Brokerage view
- Jefferies initiated coverage with a Buy rating.
- Target price
- Rs 710, implying 26% upside.
- Target valuation
- 40 times September 2028 estimated operating profit after tax.
- SBI contribution
- SBI accounts for 35% of SBI Funds’ equity AUM.
- Distribution cost
- 65 basis points, compared with 68-69 basis points for other banks.
- Growth outlook
- Mutual fund average AUM is expected to grow 13% annually, while closing AUM is expected to grow 18% between FY26 and FY29.
- Alternatives revenue
- Alternative investments accounted for 4% of SBI Funds’ FY26 revenue.
Sources
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