IGI Logo

SBI Life reported a decent set of numbers in Q1FY24, with VNB of Rs8.72bn (-1% YoY; Emkay: Rs8.6bn) coming in line with our estimate, driven by slight miss on APE at Rs30.3bn (+4% YoY; Emkay: Rs30.9bn) and a minor beat on VNB margin at 28.8% (-1.4ppts YoY; Emkay: 28%). Operating assumption changes (FY23 vs FY22) partly offset the margin decline on account of the 9ppt YoY sharp decline in non-par savings in the product mix and the YoY decline in interest rates. Overall, Company continues to keep its business strategy simple by capitalizing on its brand, distribution and cost advantage as well as delivering growth and margins led by the product mix, as per customer/distributor demand. We marginally increase FY24-26E APE growth, while keeping margin estimates unchanged and reiterate our BUY rating, with Jun-24E TP of Rs1,560/share (FY25E P/EV: 2.4x).

Result on expected lines; margin held up well, despite product-mix changes SBI Life reported an overall satisfactory set of numbers in Q1FY24. APE grew a muted 4% YoY to Rs30.3bn, owing to the high base of Q1FY23 and was slightly below our estimate. VNB at Rs 8.72bn was 1% above our estimate on account of the 28.8% VNB margin coming 0.8ppt above our estimate. VNB margin declined 1.4ppts YoY, but was better than our estimate, as improved operating experience-led assumption changes partly offset the negative impact from the unfavorable product mix changes and the decline in interest rates. Profit after tax at Rs3.8bn stood 32% above our estimate. Helped by the buoyant equity markets, Assets under Management grew 23% YoY to Rs3.28trillion. Operating expense and persistency (13th- and 25th-month) saw some worsening; however, as growth catches up and the company increases its efforts on renewal, these two factors will be taken care of.

Keeping it simple remains the business strategy Management has been consistent in keeping the business strategy simple, by capitalizing on its brand, distribution and cost advantage for penetrating the vast life insurance opportunities on offer by India (Bharat). On product mix, Management continues to reiterate its view that it will be led by customer & distributor demand in the prevailing economic environment and the company will not pursue any product-mix target. Overall, Management remains confident about delivering FY24 VNB margin of around 28%, while maintaining its aspiration of ~20% Individual APE growth. As the year progresses, growth and persistency will catch up. Despite freeing up of the commission-cap, it is unlikely that the commission payout ratio will see any material change in FY24, given: i) need to protect the interest of the customer, and ii) SBI’s (Parent and main distributor) target of optimizing commission income and the franchise value of SBI Life.

We reiterate BUY, with largely unchanged estimates To reflect Q1FY24 developments, we adjust our estimates thus leading to ~1% increase in FY24-26E APE, while VNB margins have remain unchanged. Our PAT estimates for FY24-26E have increased by ~6%. We reiterate our BUY rating on the stock, with our Appraisal Value method-led Jun-24E Target Price of Rs1,560/share (implied FY25E P/EV: 2.4x). Given the brand, distribution and cost advantage, SBI Life is one of the bestpositioned franchises in the Indian Life Insurance sector to clock sustainable growth ahead.

To Read Complete Report & Disclaimer Click Here

For More  Emkay Global Financial Services Ltd Disclaimer http://www.emkayglobal.com/Uploads/disclaimer.pdf &

SEBI Registration number is INH000000354

Above views are of the author and not of the website kindly read disclaimer