Brokerages continue to remain bullish on SBI Life Insurance, latest data from Moneycontrol's Analyst Call Tracker reveals. The stock has gained around 21 percent in the current calendar year till October 13. Over the last five years, the stock has gained around 80 percent.
According to Moneycontrol's Analyst Call Tracker, 99 percent of brokerages (33) that track the company have a buy call on the stock, with one hold call. So, what is driving the optimism on the stock?
Most brokerages remain positive on the basis of strong APE growth and opportunity for margins to improve further. In Q1FY25, SBI Life Insurance reported a net profit of Rs 519 crore, up 36 percent from the year-ago period. The annualised premium equivalent (APE) of the insurer stood at Rs 36,400 crore.
In a September 2024 report, analysts at Incred Equities upgraded their rating on SBI Life to a 'Buy' from ‘Hold’ with a new target price of Rs 2,150, or valuation of around 2.6x P/FY26F EV. According to the brokerage, the upgrade was done as a result of their belief that the stock will provide favourable risk-reward.
"We feel margins will improve gradually with the insurance companies rising focus on protection plans as well as the negative impact of the surge in ULIPs already factored in," the brokerage said.
Despite underperformance against industry peers, analysts at Nuvama also continue to remain positive on the stock due to its individual growth. They continue to retain a buy call. According to the brokerage, the life insurer saw an individual APE growth of 9.1 percent YoY in September 2024 with total APE growing 8.1 percent YoY. SBI Life is one of Nuvama's top picks in the life insurance segment.
In its analysis of SBI Life'S Q1 earnings, analysts at JM Financials said that across the insurance segment there have been strong ULIP sales. SBI Life remains the market leader in ULIP sales. According to the brokerage, its ULIP premiums grew 40 percent to Rs 2,220 crore.
The brokerage added that the company is focused on growing protection – with the launch of higher Sum Assured variants.
"It has identified educational loan customers for sales of both individual and group protection. It has traditionally focused on home loan customers for credit-protect business. The company also intends to increase rider attachment to grow its VNB margins," the report said.
On positives, analysts at JPMorgan, in a report, noted that in Q1, the total cost ratio decreased to 10.5% (vs 10.8% in 1Q24) due to lower operating expenses.
“Management maintained APE growth guidance at 20%, with a focus on improving margins via product mix and expanding the protection segment. Agency channel APE grew 45% Y/Y," they highlighted while adding that it is achievable.
On the other hand, the brokerage noted that in Q1, the product mix shifted towards ULIPs. However, protection APE declined by 19 percent year on year, driven by a 30 percent drop in individual protection APE, reducing the protection mix to 8 percent against 12 percent in the Q1FY24. "Non-par product margins were impacted due to lower interest rates not passed on to customers, while banca channel growth remained muted at 9%," stated the report.
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