Buy SBI Life Insurance; target of Rs 810: HDFC Securities

HDFC Securities' research report on SBI Life Insurance

While SBI Life’s Total APE for FY18 grew 26.9% YoY, 4QFY18 Total APE growth was  muted  at 6.3% YoY largely due to the high base in 4QFY17. VNB Margins for the year expanded 80bps to 16.2% for FY18.  Margin increase was despite a  negative  experience in mortality, and was driven by better product mix, positive experience in persistency, and lower acquisition costs.

Outlook
We have fine tuned our APE and margin assumptions  resulting  in  VNB  reducing  by  4.1/4.1%  for  FY19E/20E. We continue  to  like  SBI  Life  due  to strong distribution footprint of its parent  SBI,  lowest  operating  cost ratios in the industry, and tailwinds from financialisation of savings. We maintain BUY with a TP of Rs 810 (FY20 EV+ 25x FY20E VNB).

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