Emkay Global Financial has given Buy recommendation for SBI Life Insurance with a target price of Rs. 1230 in its research report issued on Jul 26, 2021

Emkay Global Financial’s report on SBI Life Insurance

SBIL reported healthy growth in value of new business (VNB) in Q1FY22, up ~45% yoy (-61% qoq) to Rs3.4bn. Annualized premium equivalent (APE) grew 27% yoy to Rs16.2bn. AUM growth was also healthy at ~32% yoy to Rs2.3tn. In NBP, SBIL maintained leadership among private players with an ~18.9% market share. VNB margins improved ~250bps yoy (-100bps qoq) to ~21.2% in Q1FY21, lower than our estimate of ~21.8% due to a surge in ULIPs (~37% of product mix) against non-par products. SBIL’s dependence on Bancassurance (~45% of distribution) would allow steady growth for ULIPs. SBIL, like its peers, witnessed a jump in Covid-related claims. It maintains Rs4.5bn in provisions, along with tightening of mortality assumptions. Management remains firm over SBIL’s ability to cope with incremental claims. SBIL saw a surge in demand for protection plans (~13% of mix), mainly aided by demand for group protection.

Outlook

We continue to like SBIL, considering steady growth and favorable risk-reward. We keep our estimates unchanged and maintain Buy with OW in EAP. We roll forward to Sep’22E and arrive at a TP of Rs1,230 (previously Rs1,150), corresponding to ~2.6x P/Sep’23E EV.

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