Add ICICI Pru Life Ltd for the Target 600 by Emkay Global Financial Services Ltd
ICICI PRU Life delivered a healthy performance in 1QFY27 with APE at Rs21.4 (+14.6% yoy), ~2% higher than our estimate, while VNB margin at 26.7% beat our/consensus estimate of 24.5%/24.7%, respectively. The strong VNB margin delivery during the quarter was driven by robust growth of ~46% in the protection segment, led by the GST rate exemption. The share of protection business is expected to moderate going forward, given 1) seasonally high share of GTI-led protection in 1Q, and 2) the GST exemption-led strong growth will come in the base from 2HFY27. The company has maintained a diversified distribution mix with no individual distributor (other than ICICI Bank) contributing more than ~5% of the channel mix. The management is focused on growing absolute VNB. Our FY27-29 estimates are unchanged; we maintain ADD on the stock and Jun-27E TP of Rs600, implying FY28E P/EV of 1.3x.
Robust growth in protection drives strong VNB margin delivery
During 1QFY27, IPRU Life’s APE at Rs21.4bn grew 14.6% yoy and was ~2% higher than our/consensus estimate. 1QFY27 VNB margin at 26.7% (+220bps yoy) was higher than our/consensus estimate of 24.5%/24.7%, respectively, despite the impact of GST ITC losses. The strong VNB margin delivery in 1Q was driven by a robust ~60% growth in Retail Protection, while the Group Protection business grew ~38%. For 1QFY27, VNB at Rs5.71bn grew ~25% yoy, beating our estimate of Rs5.1bn. PAT at Rs3.9bn increased 28% yoy, higher than our estimate of Rs3.5bn. AUM at Rs3.34trn increased 2.9% yoy, coming in 1.8% higher than our estimate. Solvency ratio was healthy at ~225%, while persistency dipped in some cohorts
Protection segment shines; Non-Par segment witnesses competition
The Retail Protection segment saw strong ~60% growth in 1QFY27, driven by the GST rate exemption. Further, with GTI remaining seasonally high in 1Q, the quarter saw ~38% growth in the Group Protection segment. The GTI business saw recovery in the MFI segment, while the Non-MFI segment saw healthy momentum. Further, share of the Protection segment is expected to moderate as the GST rate cut-led growth comes in the base from 2H. While the company continues to reprice protection products on BAU basis in certain mis-priced products, the management does not expect en masse repricing in the protection segment in 2H for the industry. Non-par products witnessed competition from other alternative investment products (Fixed Deposits), which provided better rates to customers. Over the years, the company has diversified its distribution mix with no partner, barring ICICI Bank, contributing to more than ~5% of the channel mix.
We maintain ADD on IPRU Life and Jun-27E TP of Rs600
Our FY27-29 estimates are unchanged. We remain watchful of the developments with respect to the Standard Chartered Bank channel, following Prudential’s exit from ICICI Pru Life. We maintain ADD on the stock and Jun-27E TP of Rs600, implying FY28E P/EV of 1.3x. The expected stake sale by Prudential is likely to result in an overhang on the share price of ICICI PRU Life
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