Buy SBI Life Insurance Company; target of Rs 1901: KR Choksey

KR Choksey's research report on SBI Life Insurance Company

The Gross Written Premium (GWP) for Q2FY25 stood at INR 204,132 Mn, a growth of 1.2% YoY (+31.1% QoQ), primarily led by a 15.8% YoY growth in the renewal premium. GWP missed our estimates. The Value of the New Business (VNB) declined by 2.7% YoY (+49.5% QoQ) to INR 14,500 Mn. PAT for Q2FY25 was INR 5,294 Mn, a growth of 39.3% YoY (+1.9% QoQ). As of September 30, 2024, AUM stood at INR 4,389.5 Bn, a growth of 27.2% YoY (+5.8% QoQ), with a debt-equity mix of 60:40. The embedded value for the quarter ended September 2024 stood at INR 660.7 Bn, a growth of 28.9% YoY and an operating return on embedded value (ROEV) of 19.5%, indicating that SBILIFE is efficiently generating returns on its existing business. SBILIFE’s solvency ratio as of September 30, 2024, stood at 2.04x, which is significantly above the regulatory requirement of 1.5x.

Outlook

We revise our target price to INR 1,901 per share (earlier INR 2,160), assigning a multiple of 2.2x (earlier 2.5x) for its FY26E embedded value. Accordingly, we maintain our “BUY” rating.

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