Motilal Oswal is bullish on ICICI Prudential Life Insurance has recommended buy rating on the stock with a target price of Rs 475 in its research report dated July 24, 2019.
Motilal Oswal's research report on ICICI Prudential Life Insurance
1QFY20 PAT at INR2.8b came in marginally higher than our estimate of INR2.7b. Gross premium was up 14.7% YoY, mainly led by robust growth in single premiums. Group premiums grew 105% YoY to INR8.2b. Total APE grew 5.3% YoY to INR14.7b led by robust 88% YoY growth in Protection APE to INR2.1b, even as Savings APE declined 2.1% YoY to INR12.5b. Share of Protection in total APE improved further to 14.6% (8.2% in 1QFY19) while share of ULIPs in total APE declined ~860bp YoY to 71.2%. VNB margins increased~350bp YoY to 21% due to improvement in product mix, which resulted in 26.6% YoY growth in the VNB to INR3.1b. Growth in the VNB
was mainly led by Retail and the Group Protection business (Management expects to double the VNB over the next 3-4 years). Thirteenth month persistency declined 140bp YoY to 84.4% (330bp YoY improvement in 61st month persistency). According to the sensitivity analysis disclosures, a 100bp change in the interest rate could impact the VNB/EV by ~4.4%/~2.0%.
We estimate ~29% CAGR in the VNB over FY19-21E led by 17% CAGR in new business APE while operating RoEV is expected to sustain at ~20%. Thus, we estimate VNB margins to recover to ~22% by FY21E while operating metrics improve further. Despite the stock's outperformance over recent months, it is still trading at attractive levels of 1.8x FY21E P/EV (LTA of 2.5x), and thus, offers 24% upside to our fair value of INR475/share (2.3x FY21E EV). Maintain Buy.
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