Buy SBI Life Insurance; target of Rs 1170: HDFC Securities

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HDFC Securities' research report on SBI Life Insurance

With business recovery underway (3QFY21 APE: +4.3/29.6% YoY/QoQ), along with an increasing adj. VNB (VNB: +7.1/37.5% YoY/QoQ), we believe SBILIFE is on track to deliver a respectable FY21E (APE/VNB 0.4/3.9% YoY). We are fans of the strong distribution footprint of its parent SBI (24k+ branches), improving protection share (9MFY21: 11.1%, +314bps YoY), and lowest operating cost ratios (9MFY21: 8.5%, -150bps YoY). We expect SBILIFE to deliver a healthy FY21-23E VNB CAGR of 11.4% and RoEVs of ~15.0-16.7% over FY21-23E.

Outlook

We retain our BUY rating on SBILIFE with an increased TP of Rs 1,170 (Sep-22E EV + 26.3x Sep-22E VNB). The stock is currently trading at FY22/23E P/EV of 2.4/2.1x and P/VNB of 20.1/15.6x. Lower growth, renewals, and protection share are key risks.

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