Buy SBI Life; target of Rs 1850: Emkay Global Financial

Emkay Global Financial's research report on SBI Life

SBI Life delivered an impressive performance in Q3FY25 with growth rebound in the banca channel (10% YoY in Q3 vs 7% in H1), which led to Retail APE growth of 13% in Q3 on a strong base of last year, and VNB margins for the quarter coming in at 26.95% vs 26.86% of 9M despite implementation of the new surrender regulations. Overall, 9M/Q3 numbers came in better than our estimates, on both – growth and margins. The growth and profitability trajectory looks predictable, with growth rebounding in the banca channel, performance of the agency channel improving, clarity on changes in surrender regulations, and limited impact, if any, from possible removal of the Section 80C exemption in the upcoming budget. To bake in the Q3FY25 developments and management commentary, we increase our APE estimates by 3-4% and VNB Margin by 50-60bps, resulting in ~5% increase in VNB in FY25-27E. Key risks: i) Unfavorable regulatory changes on the corporate or personal taxation front in the budget. ii) Slowdown in the banca channel.

Outlook

We upgrade SBI Life to BUY from Add with revised up Dec-25E TP of Rs1,850, implying FY26E P/EV of 2.3x.

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