Buy SBI Life; target of Rs 1900: Emkay

Emkay's research report on SBI Life

SBI Life delivered a largely in-line performance during Q1FY25, with APE at Rs36.4bn (+20% YoY) vs. our estimate of Rs35.8bn and VNB margin at 26.8% (Emkay: 27.2%), leading to in-line VNB at Rs9.7bn. Though APE growth was mostly driven by strong growth in ULIPs backed by market buoyancy, the Protection and Annuity segment saw de-growth. Given the multitude product launches in the protection segment, the management expects protection growth to pick up in Q2. Considering SBI Life’s ULIP-heavy product mix, the management envisages limited impact on VNB margin from new surrender regulations. Overall, the management remains optimistic about the growth trajectory tracking its ~18-20% APE growth guidance; it expects margins to range at around 28%. To factor in the Q1 developments,

Outlook

We increase FY25-27E APE by 2.5% and cut VNB margin by 120bps; this results in a ~2% cut in VNB estimates. We maintain our BUY rating on the stock, revising up Jun-25E TP to Rs1,900/sh (Rs1,800 earlier), implying 2.3x FY26E P/EV.