Accumulate ICICI Prudential Life Insurance; target of Rs 556: Dolat Capital Market

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Dolat Capital Market's research report on ICICI Prudential Life Insurance

IPRU reported a sequential growth of 13.7% in overall APE growing to Rs. 16.7bn in Q3FY21 led by the pick-up in the savings business, up 14.3% YoY to Rs. 14.1bn. On an annual basis, however, APE growth is still negative. We expect APE to be in the positive for Q4 on the back of rebasing arising from COVID-19 impact in March sales as well as strategic shift of ICICI bank in Feb 2020 towards protection and annuity as against traditional products. ULIPs continued to show sequential recovery, up 20.7% QoQ to Rs. 8.5bn in Q3FY21. Recovery in equity markets has aided the sequential recovery in this segment. We estimate a 35-40% decline in this segment in FY21, followed by a 30-35% growth in FY22 on the back of new partner additions and lower base from FY21. Non-linked savings remains the silver lining up both QoQ and YoY 10.2% / 36.2 % respectively. ICICI banks push for annuity products has helped drive the annuity segment. IPRU has also forayed into the deferred annuity segment with the launch of a product. We expect single premium growth to be therefore ~30% for FY21. Conducive FRA environment and current yield curve structure has allowed IPRU to manufacture these products. We expect growth in this segment to moderate in FY22. Retail protection continues to see an annual decline while credit protect has picked up. The fall in protection is largely due to supply side constraints as there are still challenges in conducting medical tests. IPRU’s. We expect protection segment to form ~15-17% of the mix in FY22. VNB was flat YoY at Rs 4.3bn in Q3FY21 despite topline decline largely due to changing business mix. Margins were healthy at 25.7% for Q3FY21. We expect margins in the range of 24-25% for FY22.

Outlook

We believe IPRU will continue to lag behind peers in top-line growth and on the back of the recent run up in the stock, we downgrade our recommendation from BUY to ACCUMULATE on IPRU. Our TP is revised to Rs. 556 implying a FY22 P/EV of 2.4x.

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