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Last Updated : Jan 24, 2020 12:16 PM IST | Source:

Analysts remain bullish on SBI Life after Q3, see 12-20% rally

ICICI Direct remains positive on SBI Life structurally being a play on growth led by distribution, brand reach and adequate product mix.

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SBI Life Insurance Company gained 1.6 percent intraday on January 24 as brokerage houses remained bullish on the stock, citing continued robust growth trajectory in Q3FY20.

All brokerages have a buy call on the stock expecting it to give 12-20 percent return though the counter has rallied more than 60 percent in the last one year.

Despite slower premium accretion in the industry, SBI Life Insurance continued to clock healthy growth. Improving persistency, high-margin protection business and excellent operating efficiency remained strong levers for growth.


ICICI Direct rolled over its estimates to FY22, expecting around 18 percent CAGR in embedded value (EV) in FY19-22 to Rs 36,350 crore.

VNB margin expanded by 80bps YoY to 18.3 percent in the April-December period, driven by a 500 bps positive variance from a change in the product mix, 190bps negative variance due to a change in assumptions and 230bps negative impact due to falling interest rates.

"We expect VNB margins as calculated to increase from 16.7 percent in FY19 to around 17-18 percent in FY22. Strong distribution would remain the key catalyst. Operating return on embedded value (RoEV) is seen improving at around 18.5 percent in FY22," said the brokerage, which revised its target price to Rs 1,180 from Rs 1,000 per share, valuing the stock at 3.2x FY22E EV.

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"We remain positive on SBI Life structurally being a play on growth led by distribution, brand reach and adequate product mix. We maintain buy," it said.

SBI Life's Q3 gross written premium (GWP) and annual premium equivalent (APE) grew 28.3 percent YoY and 15.8 percent YoY, respectively, led by incentivising agents toward selling higher-ticket size ULIPs.

Non-participating continued to grow strong at 2.6x YoY (down 29 percent QoQ).

Persistency, excluding single premium, expanded across cohorts, with 13th month and 61st month persistency improving by 150bps YoY and 290bps, respectively, while 25th month persistency expanded by 400bps YoY.

SBI Life reiterated its focus on protection, annuity and non-participating savings products.

Growth in Q3FY20 was driven mainly by the higher-ticket size ULIP segment, with slower growth in protection at 9.5 percent YoY, said Emkay which maintained a buy call on the stock with a price target at Rs 1,100.

SBI Life's new business profit (NBP) continued to grow strong at 35 percent YoY, with APE growth of 22 percent on very strong growth from non-participating.

Profit during the quarter shot up by 47.5 percent YoY and 200.2 percent QoQ to Rs 389.8 crore and total income grew by 29.9 percent YoY (up 23.8 percent QoQ) to Rs 15,954.7 crore in Q3.

Protection business growth moderated to 36 percent YoY as individual protection de-grew 8 percent sequentially as an aberration on push to higher ticket size products, though the management maintained the core focus remains to ramp up protection.

"Overall operating metrics like persistency, margins, cost have been improving while growth has remained steady which will continue to do so ahead," said Prabhudas Lilladher while retaining buy rating on the stock with revised price target of Rs 1,127 (from Rs 991 per share).

The stock was one of the biggest gainers among largecaps, rising more than 60 percent in the last one year. It was quoting at Rs 994, up Rs 13.20, or 1.35 percent, on the BSE at 1110 hours.

Disclaimer: The above report is compiled from information available on public platforms. advises users to check with certified experts before taking any investment decisions.

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First Published on Jan 24, 2020 12:16 pm
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