sbi life: Why is SBI Life analysts’ top insurance sector bet post Q1


SBI Life’s June quarter results cheered investors and sent the stock soaring 10 per cent in Friday’s trade. Analysts said the numbers were stellar on all counts be it growth or margins.
bucked the trend of slowdown seen at peers in terms of growth in annual premium equivalent (APE) and retail protection APE. Among key highlights, VNB margin saw expansion, driven by change in product mix, mainly due to a rise in the share of non-par guaranteed business. Par business also made a relative comeback on a YoY basis, analysts said. They gave price targets on the stock that suggested a potential 26-44 per cent upside over Monday’s closing price.

SBI Life’s three-year APE CAGR of 17.7 per cent was significantly superior to

‘s 4 per cent and ‘s 1 per cent, said Elara Capital, which noted the value of new business (VNB) in came in at Rs 880 crore in June quarter, up 125.8 per cent YoY and 28.5 per cent above its estimates.

“Given a formidable base ahead over Q2 and Q3, we have built in moderate APE growth despite the strong management guidance. Additionally, we have built in product mix, led by stronger margin, propping up FY23E and 24 VNB estimates,” Elara said with a revised target of Rs 1,690 from Rs 1,500 earlier.

Driven by the exceptionally strong growth in non-par guaranteed saving products, VNB margins grew 6.7 per cent YoY to 30.4 per cent, while APE saw 79 per cent YoY growth on a favorable base, said


“The solid Q1 performance underscores the strength of the formidable combination of brand and distribution reach in terms of geography and demography that SBI Life has. The management remained confident about delivering growth and maintaining margin trajectory. With its distribution channels firing on all cylinders, expanding product offerings and increasing acceptance, we expect robust growth to continue in FY23 and beyond,” the brokerage said.

Based on the risk-reward proposition, the brokerage has SBI Life as its top pick in the sector, as it pegged the stock at Rs 1,710. YES Securities sees the stock at Rs 1,675; IIFL sees it at Rs 1,610, up from Rs 1,510 earlier. The stock trades at 16 per cent discount to peers which we believe could further narrow, IIFL said.

On Friday, the stock hit a high of Rs 1,304.45, up 10 per cent.

SBI Life on Thursday reported a 17.78 per cent year-on-year (YoY) rise in net profit at Rs 262.85 crore for the June quarter compared with Rs 223.16 crore in the corresponding quarter last year. Gross written premium (GWP) for the quarter rose 35 per cent YoY to roughly Rs 11,350 crore in the June quarter, mainly due to 83 per cent growth in first-year premium (FYP) and 14 per cent growth in renewal premium.

New business premium (NBP) grew 67 per cent to roughly Rs 5,590 crore in the June quarter, driven by strong growth. Protection NBP increased 63 per cent to Rs 700 crore from Rs 430 crore YoY, thanks to 55 per cent growth in individual protection business at Rs 200 crore and 66 per cent growth in group protection business at Rs 500 crore.

The annual premium equivalent (APE) grew 80 per cent to Rs 2,900 crore. Value of new business (VNB) was up 130 per cent YoY to Rs 8,800 crore. VNB margin expanded 665 basis points to 30.4 per cent.

said SBi Life displayed a strong show and, despite volatility in capital markets, its ULIPs grew 33 per cent YoY.

“All distribution channels contributed to the growth along with a rise in productivity of banca and agency channels. This led to a better cost ratio and SBI Life continues to maintain cost leadership. Persistency improved across all key cohorts. We estimate 27 per cent CAGR in APE over FY22-24. We further estimate VNB margin to remain steady from hereon to reach 30 per cent in FY24, thus enabling 36 per cent VNB CAGR,” this brokerage said while suggesting a target of Rs 1,500 on the stock.

(Disclaimer: Recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of Economic Times)



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