Buy SBI Life Insurance Company; target of Rs 779: Prabhudas Lilladher

Prabhudas Lilladher's research report on SBI Life Insurance Company

SBI Life's new business APE growth improved to 9% YoY in H1FY19, while GWP grew by 41% YoY on back of strong renewal premium growth of 41% YoY in Q2FY19 which has helped persistency improve across cohorts except for 61st Month. Protection continues to drive new business growth improving share to 10.4% up 30bps QoQ from traction in both individual & group life. EV grew 10% YoY in H1FY19, slightly slower on higher impact from economic variance (MTM loss in G-sec) offsetting positive gains from persistency, mortality and cost. We have tweaked our APE growth assumptions to 20% from 24% but increased margins upward by 30bps.

Outlook

We also reduced our EV by 2% for FY19E. We believe, momentum to continue on key products and improving penetration leading to improve margins, hence we maintain BUY with revised TP of Rs779 (reduced from Rs840) implying 2.8x multiple (reduced from 3.2x) on Sep-20 EV (rolled from Mar-20 EV).