Buy ICICI Prudential Life Insurance; target of Rs 475: Motilal Oswal
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.
July 26, 2019 / 05:12 PM IST
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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