Buy SBI Life Insurance; target of Rs 1580: HDFC Securities

HDFC Securities' research report on SBI Life Insurance

SBILIFE’s adj. VNB came in 4% above estimates at INR15bn (+35% YoY), as VNB margin expanded 630bps QoQ to 32.9% on the back of a higher share of NPAR savings in the mix (Q4FY23: 23%). While the management remains upbeat about achieving a 20-25%YoY APE growth in FY24E, we continue to watch out for sensitivity to insurance sales from the removal of (a) tax incentives in the new tax regime and (b) tax exemption in NPAR savings with ticket size >INR0.5mn. The company's three long-term growth levers are in place: (a) SBI’s massive distribution network (26k+ branches); (b) a healthy mix of protection and NPAR; and (c) the lowest opex ratio among peers (FY23: 9.6%).

Outlook

We expect SBILIFE to deliver FY23-25E APE/VNB CAGRs of 12/12% and retain BUY with a lower TP of INR1,580 (2.4x Mar-25E; rolling forward multiple adjustment and factoring in high uncertainty to FY24E estimates).