Add ICICI Pru Life Ltd For Target Rs 700 By Emkay Global Financial Services Ltd
ICICI PRU Life delivered a healthy performance in Q4FY26 with APE at Rs38.3 (+9.4% YoY), ~2% higher than our estimate, while VNB margin at 25.2% beat our estimate of 24.3%. The strong VNB margin delivery during the quarter was driven by robust growth of ~61% in the retail protection segment led by the GST rate exemption and higher product-level margins—owing to sales of high sum-assured and long-tenure products. Further, while the favorable base should support growth in FY27E, the management is working granularly, targeting micro markets and different customer segments for driving growth. To bake in the Q4 developments, we marginally raise our APE growth estimate by ~1% while keeping VNB margin unchanged over FY27-28E. We introduce FY29 estimates; maintain ADD and Mar-27E TP of Rs700 implying FY28E P/EV of 1.5x.
Strong VNB margin delivery led by robust growth in Retail Protection During FY26, IPRU Life’s APE at Rs106.4bn grew 2.2% YoY and was ~1% higher than consensus/our estimate. For Q4FY26, APE at Rs38.3bn grew ~9% YoY and was ~2% higher than our estimate. FY26 VNB margin at 24.7% was higher than consensus/our estimate of 24.3%/24.4%, respectively, implying Q4FY26 VNB margin at 25.2% vs our estimate of 24.3%. The strong VNB margin delivery in Q4 was driven by a robust ~61% growth in Retail Protection, while the company saw improvement in product-level margins across categories. For FY26, VNB at Rs26.3bn grew ~11% YoY, beating our estimate of Rs25.8bn, whereas Q4FY26 VNB at Rs9.7bn (+21% YoY) was ~5% higher than our estimate. Embedded Value at Rs530bn (Emkay: Rs520bn) grew 10.5% YoY and was impacted by negative persistency variance and negative economic variance. Solvency ratio was healthy at ~227%, while persistency dipped in some cohorts.
Growth remains key for stock re-rating
ICICI PRU Life has tracked ~8% APE CAGR over FY24-26, lagging that of some peers. While the company saw ~2% APE growth in FY26, creating a favorable base for FY27, the management remains focused on working granularly, targeting micro markets for driving growth. Further, the GST rate exemption has resulted in strong growth in the retail protection segment, driven by higher affordability. Additionally, while the agency channel saw ~11% YoY decline in FY26, the management noted that the channel has witnessed consistent improvement on sequential basis. The company has been investing in the agency channel from a long-term perspective. Overall, recovery in growth remains key for stock re-rating.
We maintain ADD on IPRU Life and Mar-27E TP of Rs700
To bake in the Q4 developments, we tweak our estimates which leads to ~1% increase in APE. We keep our VNB margin estimates largely unchanged which results in ~1% increase in VNB over FY27-28E. We introduce FY29 estimates; maintain ADD and Mar27E TP of Rs700 implying FY28E P/EV of 1.5x.
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