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Buy SBI Life Insurance; target of Rs 1400: Motilal Oswal

Motilal Oswal is bullish on SBI Life Insurance recommended buy rating on the stock with a target price of Rs 1400 in its research report dated September 30, 2021.

September 30, 2021 / 01:00 PM IST
HDFC Securities research report's outlook and valuations:  500bps growth outperformance over FY21-24E as compared to 250bps earlier). We roll over valuations to Sepemtember-23E and increase target multiples for most of the companies in our coverage universe. We remain broadly constructive across the sector and ahead of consensus on growth/EPS; our preferred picks are Infosys, HCLT, Mphasis and Zensar."" title="HDFC Securities research report's outlook and valuations:  "The YTD EPS upgrades (consensus) have been led by mid-tiers such as Tata Elxis, Mindtree, Mastek, and Persistent Systems, ranging from 20-40 percent and, within tier 1, by Wipro (~15%). We expect the sector (coverage universe) to post 13 percent and 14.5 percent USD revenue/APAT CAGR over FY21-24E compared to 6.5/7.5 percent over the past five years. The mid-tier valuation premium relative to tier 1s may sustain, based on its relative outperformance (>500bps growth outperformance over FY21-24E as compared to 250bps earlier). We roll over valuations to Sepemtember-23E and increase target multiples for most of the companies in our coverage universe. We remain broadly constructive across the sector and ahead of consensus on growth/EPS; our preferred picks are Infosys, HCLT, Mphasis and Zensar."" width="100%" height="auto" >

HDFC Securities research report's outlook and valuations:  "The YTD EPS upgrades (consensus) have been led by mid-tiers such as Tata Elxis, Mindtree, Mastek, and Persistent Systems, ranging from 20-40 percent and, within tier 1, by Wipro (~15%). We expect the sector (coverage universe) to post 13 percent and 14.5 percent USD revenue/APAT CAGR over FY21-24E compared to 6.5/7.5 percent over the past five years. The mid-tier valuation premium relative to tier 1s may sustain, based on its relative outperformance (>500bps growth outperformance over FY21-24E as compared to 250bps earlier). We roll over valuations to Sepemtember-23E and increase target multiples for most of the companies in our coverage universe. We remain broadly constructive across the sector and ahead of consensus on growth/EPS; our preferred picks are Infosys, HCLT, Mphasis and Zensar."

 
 
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Motilal Oswal's research report on SBI Life Insurance


SBILIFE has reported strong traction in new business growth, with Individual WRP growth of 52%/67% over Jul’21/Aug’21. In FY22 YTD, it has delivered Individual WRP growth of 48% YoY, while two-year CAGR stands healthy at 20%. Our recent interaction with the management indicates pick up in business momentum, with growth bouncing back strongly across all segments. The management is aiming at healthy double-digit growth over FY22E (20-25%), which would be among the best in the past few years. We estimate 20% CAGR in APE growth over FY21-24E. Agency channel has shown a strong bounce back and is contributing well to business growth. Strong momentum in high margin segments such as Annuity and Credit Life would aid further improvement in VNB margin. SBILIFE does not see any major challenge with respect to COVID-related claims. However, it may take a few months for the trend to stabilize completely. Persistency ratios are holding well across cohorts, while cost ratios may increase slightly on a revival in business growth.



Outlook


We estimate VNB to grow at 24% CAGR over FY21-24E, with operating RoEV to sustain by ~18% by FY24E. SBILIFE is among our preferred picks in the Life Insurance space. We reiterate our BUY rating with a TP of INR1,400/share (2.6x 1HFY24E EV).



For all recommendations report, click here


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first published: Sep 30, 2021 01:00 pm

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