Buy ICICI Prudential Life Insurance Company Ltd For Target Rs.680 - Yes Securities
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FY24 to be mainly about topline growth, with some margin expansion
Result Highlights
? VNB margin: Calculated VNB margin increased by 285bps QoQ to 33.9% driven by various factors ? VNB growth: VNB de-grew/grew -0.5%/20% QoQ/YoY, where the YoY growth was aided by strong improvement of 722bps in calculated VNB margin ? APE growth: New business APE de-grew -8.9% QoQ and -5.5% YoY, where the sequential de-growth was driven by Annuity and Protection segments ? Expense control: Expense ratio fell/rose -14/130 bps QoQ/YoY as opex ratio rose 4/180 bps QoQ/YoY and commission ratio fell -18/-50 bps QoQ/YoY ? Persistency: 13th month, 37th month and 61st month persistency ratio improved/deteriorated sequentially by 10bps, -30bps and -50bps respectively
Our view – FY24 to be mainly about topline growth, with some margin expansion
Going forward, IPRU will not be dependent mainly on VNB margin for VNB growth: There is a long way to go in terms of enhancing the activity and capacity of non-ICICI Bank partners. Further, IPRU is also working on whom to pitch for in terms of new partnerships. There has also been an investment in the agency network, which takes 1- 2 years to have impact. In FY24, topline will be the main driver for VNB growth with VNB margin being stable to higher. IPRU can grow VNB in line with VNB for the sector, which implies 15-20% compounded growth for VNB
Protection continues of be an area of healthy growth, with retail protection also growing on sequential basis: Total Protection APE has grown 22.7% YoY in 9MFY23 with its share reaching 19.7% in total APE. It is true that sequential momentum in retail protection has come from ROP but there has been a sequential pick up in retail protection even without ROP. There are no supply side issues or demand side weakness and it is just that the distribution network is still getting used to changes to under-writing norms, which is a big shift in terms of how Protection is being sold.
We maintain ‘Buy’ rating on IPRU with a revised price target of Rs 680: We value IPRU at 2.3x FY24 P/EV for an FY23E/24E/25E RoEV profile of 16.6/17.0%/17.2%.
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