Buy ICICI Prudential Life Insurance; target of Rs 580: Motilal Oswal

Motilal Oswal's research report on ICICI Prudential Life Insurance

ICICI Prudential Life Insurance (IPRU) reported a 4.7% YoY growth in APE (9.5% higher than estimated) to INR19.1b in 3QFY24. In 3QFY24, protection/ULIP segments rose 5.3%/8.9% YoY but the group segment declined 15.5% YoY. VNB declined 29% YoY to INR5.4b (15% miss), due to a moderation in margins. VNB margin for the quarter stood at 22.9% (-510bp QoQ) vs. our estimate of 29.5%. For 9MFY24, APE stood at INR54.3b and VNB was at INR14.5b, with a VNB margin of 26.7%.  Considering the 3QFY24 performance, we have cut our APE/VNB margin for FY24E and FY25E. We expect IPRU to deliver a 6% CAGR in VNB over FY23- 26. Going forward, premium growth and expansion of VNB margin will be the key drivers for the re-rating of the stock.

Outlook

We note that the 1-year forward P/EV for IPRU has declined to 1.5x currently from 1.8x in Jun’23. We reiterate our BUY rating with a TP of INR580 (based on 1.5x Sep’25E EV).