Shares of SBI Life Insurance Company Limited today opened at Rs. 1262.65, reached a record high of Rs. 1,304.70 on the NSE, and closed at Rs. 1,294.00 per share, an increase of 8.61 per cent from the previous close of Rs. 1,191.45. The stock had touched a 52-week low 1,003.50 on 8 March 2022, which means that after reaching a new high, it is currently trading 28.95 percent higher than the low. Brokerage houses HDFC Securities and Motilal Oswal are bullish on the stock after the company’s impressive Q1FY23 earnings. As per research by Value Research, SBI Life Insurance Company Limited is a debt-free company, and the brokerage house anticipates that the stock will hit a new high soon.
HDFC Securities said in a note that “SBI Life reported an all-time high adj. VNB margins at 30.4% (+670bps) with a manifold increase in the NPAR savings mix to 29% (+22pps), driving adj. VNB higher 1.3x YoY to INR8.8bn (+62% vs estimate). Total APE grew 31% ahead of estimates (at 3y CAGR 15%), bettering the industry growth trend in retail security, at 63% YoY. The company’s three growth levers remain the same: (1) SBI’s vast distribution network (24k+ branches); (2) Healthy mix of security and NPAR; and (3) the lowest OPEX ratio among peers (FY22: 8.8%). We raise the VNB estimate to 12/11% taking into account the beat on APE and VNB margins. We expect SBILIFE to deliver a healthy FY22-24E APE/VNB CAGR of 18/25% and maintain the BUY with an increased TP of INR1,660 (albeit with a lower multiplier of 2.8x Mar-24E as we carry forward your earnings).
The brokerage has claimed that “Management is confident on the growth outlook for NPAR savings for FY23E and has guided for ~25-30% share of NPAR savings in the mix. We expect the share of NPAR savings to moderate for the rest of FY13E and an increase in the interest rate environment is expected to reduce VNB margins.”
Whereas Motilal Oswal in a note said that “SBILIFE showed a strong performance in 1QFY23 with 80% YoY growth in APE along with a sharp jump of 132% year-on-year in VNB. The non-PAR and higher-margin products like security side VNB margins increased by ~665bp year-on-year due to changes in the underlying product mix in 2015. Despite volatility in capital markets, ULIPs grew 33% year-on-year. Contributed to growth simultaneously. This improved cost ratio and SBILIFE maintained cost leadership. Persistence improved across all major clusters.”
“We anticipate 27% CAGR in APE in FY 2012-24. We further anticipate that VNB margins will remain stable to reach ~30% in FY24, thus enabling VNB CAGR of 36%, while ROEV will remain at ~22%. We retain our BUY rating with a revised TP of INR1,500 (based on 2.6x FY24E EV), said Research Analysts at Motilal Oswal.
Disclaimer: The views and recommendations given above are those of individual analysts or broking companies and not of Mint.
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