Buy SBI Life Insurance; target of Rs 1500: Motilal Oswal

The research firm ICICI Securities believes earnings of apparel brands and retail companies under their coverage may surprise positively from Q3FY22E as the likely demand recovery may result in better than expected margin performance. Some of the costs savings achieved during pandemic may sustain and coupled with high operating leverage may lead to higher than pre-covid margins from Q3FY22E.  Stocks like Trent, V-Mart and Aditya Birla Fashion and Retail are the preferred picks backed by their strong and consistent track record of execution.

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Motilal Oswal's research report on SBI Life Insurance

SBILIFE reported a robust 1QFY23 with APE growth of 80% YoY (7% beat) and a sharp jump of 132% YoY in VNB (28% beat). VNB margin spiked 665bp YoY to 30.4% while shareholders’ PAT grew 18% YoY to INR2.6b. Strong momentum in APE was reflected across all product segments. However, non-par savings stole the limelight in 1QFY23 with a massive growth of 645% YoY. It now forms 28% of business in APE terms. The growth was aided by a strong response to the newly launched product ‘Smart Annuity Plus’ in Mar’22. The notable improvement in VNB margin was primarily driven by a shift in underlying product mix with a larger share of high-margin products such as non-par savings and protection. Together, they constituted 39% of APE in 1QFY23 v/s 20%, a year ago. Retail protection APE growth of 54% YoY to INR2b is commendable, considering the muted performance of private peers. We raise our VNB margin estimates by 340bp and 270bp for FY23 and FY24 to 30.1% and 29.7%, respectively, and raise VNB estimate by 19% each over FY23/24. We expect SBILIFE to deliver 27% CAGR in APE over FY22-24, thus enabling 36% VNB CAGR, while RoEV sustains at ~22%. SBILIFE remains our preferred pick in the Life Insurance space. Maintain BUY.

Outlook

We retain our BUY rating with a revised TP of INR1,500 (based on 2.6x FY24E EV).

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SBI Life Insurance - 290722 - moti