Buy SBI Life Insurance Company; target of Rs 840: Prabhudas Lilladher

Prabhudas Lilladher's research report on SBI Life Insurance Company

SBI Life's new business APE growth was slow at 2% YoY largely due its ongoing process to move in digitally. Protection segment saw strong growth both in individual and group taking the share to 10% of overall product mix on total new business basis (5.5% in FY18). We have also seen margin expansion of 80bps to 17% in 1QFY19. Persistency Ratio has also improved across all buckets after adjusting single premium which can be reflected in strong renewal premium growth of ~35% YoY. We have reduced our APE growth estimates for FY19 and FY20 as management has reduced guidance from 30% to 25% for FY19.

Outlook

We maintain our recommendation of BUY with TP of Rs840 (reduced from Rs860) translating to 3.2x FY20E EV as valuations remain attractive.