Moneycontrol
Nov 10, 2017 03:21 PM IST | Source: Moneycontrol.com

Citi initiates coverage with Buy on SBI Life Insurance, sees 22% upside on robust growth

The brokerage house said franchise strengths would drive robust growth. It expects 200 basis points improvement in value of new business margin by March 2020.

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Global research firm Citi has initiated coverage with buy rating on SBI Life Insurance Company and set a price target at Rs 800 per share, implying a potential upside of 22 percent from Thursday's close. The stock rallied nearly 4 percent intraday Friday.

SBI Life looks well positioned to capitalise on increasing share of financial savings in India, it feels.

The brokerage house said franchise strengths would drive robust growth. It expects 200 basis points improvement in value of new business margin by March 2020.

It also expects value of new business to grow at a compound annual growth rate of 32 percent and average return on embedded value of 20 percent by March 2020.

Higher return on embedded value will sustain premium valuations, Citi feels.

Strong premium growth; improving persistency and cost ratios; and rising share of protection are key positives to growth.

At 15:10 hours IST, the stock price was quoting at Rs 674.40, up Rs 20.10, or 3.07 percent on the BSE.
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