Buy SBI Life Insurance Company; target of Rs 920: Prabhudas Lilladher

Prabhudas Lilladher's research report on SBI Life Insurance Company

SBI Life delivered 28% YoY growth in GWP mainly from renewal & single premium, while some recovery in regular premiums. This has led to APE recovery with de-growth of -4%/-15% YoY in Q2/H1FY21 vis-à-vis -32% YoY de-growth in Q1FY21. New business was driven by group savings, protection and recovery in ULIP. This change in business mix kept the margins steady at 18.8% (PLe of 19.6%) as recovery in ULIP offset the protection margin benefit. Improving protection mix and other higher margin products will help it deliver margins of 19-20% by FY22-23E and see strong recovery in business momentum.

Outlook

With the recent underperformance, SBI Life trades at 1.8x Sep P/EV which is quite attractive, hence we upgrade the stock to BUY (from Accumulate) with retained TP of Rs920 based on 2.3x Sep-22 P/EV.