Buy SBI Life Insurance; target of Rs 1000: Motilal Oswal

Motilal Oswal 's research report on SBI Life Insurance

SBILIFE reported strong protection trends in both Retail and Group Protection, while the trend in ULIP remained tepid. 1HFY21 VNB margins remained broadly stable at 18.8% (vs 18.7% in 1QFY21), supported by an improving business mix. Persistency improved across cohorts, with the highest improvement seen in 61st month (by 340bp YoY to 60.9% in 1HFY21), which aided growth in the Renewal business. The company continues to maintain cost leadership, with the total expense ratio declining to 7.7% (~220bp YoY improvement). 2QFY21 shareholders’ PAT grew 131% YoY to ~INR3.0b (in-line). Overall, we expect SBILIFE to deliver 17% VNB growth over FY20–23E. We further expect VNB margins to improve to ~21% and operating RoEV to sustain at ~18% by FY23E. Maintain BUY.

Outlook

Thus, we expect operating ROEV to sustain at ~18% by FY23E. Maintain Buy, with TP unchanged at INR1,000 (2.6x Sep’22E EV).