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

HDFC Securities' research report on SBI Life Insurance

SBILIFE’s adjusted VNB clocked in flat YoY at INR8.7bn, as VNB margins softened 160/411bps YoY/QoQ to 28.8% on the back of a lower share of NPAR savings in the APE mix at 19% (Q1FY23: 28%). While the management remains confident of driving a 20% YoY APE growth in FY24E, our forecasts build in a 10% YoY growth in APE print as we continue to monitor 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. Our high-conviction BUY continues to be anchored on the three powerful and sustainable moats: a) exclusive access to SBI’s massive distribution network (26k+ branches); b) a predominant and growing mix of protection and NPAR; and c) the lowest opex ratio among peers (Q1FY24: 10.8%).

Outlook

We expect SBILIFE to deliver an FY23-25E APE/VNB CAGR of 12% and retain BUY with a TP of INR1,580 (2.4x Mar-25E).