ICICI Direct recommended is bullish on SBI Life Insurance has recommended buy rating on the stock with a target price of Rs 745 in its research report dated January 22, 2019.
ICICI Direct's research report on SBI Life Insurance
Premium growth remained strong at 35% YoY to Rs 9141 crore, led by 39% YoY traction in renewal and healthy growth in new business premium (NBP), particularly single premium that rose 121% YoY. Traction in individual business remained healthy at ~16.8% YoY while group business witnessed higher growth at 124x YoY to Rs 1016 crore. Protection business witnessed robust traction of 213% YoY On an annualised premium equivalent (APE) basis, NBP APE increased 12.8% YoY to Rs 6600 crore for 9MFY19, led by higher growth in renewal and single premium. Individual APE growth stayed healthy at 11% YoY to Rs 5980 crore, while group APE rose sharply by 79% YoY to Rs 210 crore for 9MFY19. Proportion of protection NBP continued its uptrend trajectory to 11.2% from 10.5% in Q2FY19 AUM growth remained healthy at 20% YoY to Rs 134150 crore. Investment income rose to Rs 3001 crore in Q3FY19, up 53% QoQ Operating expenses (commission & opex related to insurance business) grew 18% YoY to Rs 886 crore. Opex ratio improved to 9.7% from 10.9% in Q2FY19 due to higher growth in NBP Actuarial liabilities increased 32% YoY to Rs 7390 crore while benefit paid grew 12.4% YoY to Rs 3276 crore. Healthy premium accretion led to higher surplus at Rs 365 crore. However, higher allocation to policyholder account kept PAT at Rs 264 crore, lower than estimate SBI Life has entered into a bancassurance relation with Allahabad Bank and Syndicate Bank.
SBI Life maintained its growth trajectory in the last three years along with focus on profitability. We expect ~21% CAGR in EV in FY18-20E to Rs 27899 crore, driven by 25.7% CAGR in VNB to Rs 2197 crore in FY20E. Slower APE growth, higher volatility in market impacting business stay near term concerns. Strong distribution network, cost control & focus on high margin protection business to result in healthy operating RoEV at ~18% in FY20E. Factoring in strong fundamentals, we maintain TP of Rs 745, valuing the stock at 2.7x FY20 EV (1.5x FY20E EV + 15x FY20E VNB).
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