IGI Logo

Steady premium growth; elevated claims impact PAT

About the stock: SBI Life (SBIL) is among most dominant players in the Indian life insurance industry with strong distribution network, parentage, operating metrics.

* Balanced product mix with focus on opex ratio ahead of industry

* Strong parentage led distribution remains key catalyst

Q2FY22 Results: Steady business traction, outlook on claims optimistic.

* Gross premium growth steady at 14% YoY; NBP growth at 17% YoY

* VNB margins healthy at 21.8%, aided by product mix and rise in pricing

* Surplus up 1.3x QoQ to | 256 crore, led by higher investment income

* Net Covid claim at | 1338 crore for H1FY22; Covid reserve at | 266 crore

What should investors do? SBIL’s share price has grown by ~1.6x over the past four years (from ~| 700 in October 2017 to ~| 1180 levels in October 2021).

* Factoring distribution strength & diversified product mix, we retain our BUY rating on the stock

Target Price & Valuation: We value SBIL at 3.2x FY23 EV with revised TP of | 1360

Key triggers for future price performance:

* Launch of non-par and protection product to aid overall growth and VNB

* Covid claim seen to moderate; reserves at | 266 crore seems comfortable

* Strong distribution network remains core to maintain business momentum

* Product mix & improvement in persistency to aid VNB margins at 21-22%

Alternate Stock Idea: Apart from SBIL, in our coverage we also like HDFC Life.

* Dominant player in life insurance industry with huge growth potential coupled with strong distribution, product suite and best VNB margin

* BUY with a target price of | 850

To Read Complete Report & Disclaimer Click Here

https://secure.icicidirect.com/Content/StaticData/Disclaimer.html

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