Buy SBI Life Insurance; target of Rs 860: Prabhudas Lilladher

Prabhudas Lilladher's research report on SBI Life Insurance

SBI Life's APE growth was lower than our expectations at 27% YoY for FY18 (Ple: 34.5%) as banca channel was grew slow. It has become market leader in private space overtaking ICICI Prulife in FY18 at 21.5% on New Business APE basis. VNB margins expanded by 80bps and stand at 16.2% (15.4% in FY17). This expansion was due to operating efficiency and improvement in persistency, while mortality expenses negatively impacted margins.

Outlook
We have reduced our new business APE estimates and also Embedded Value (EV). Though FY18 APE growth disappointed, we expect the growth to pick up in FY19 and maintain BUY with revised TP of Rs 860 (from Rs 865) which translates to 3.2x FY20E EV from 3.1x.

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