Buy SBI Life Insurance Company Ltd For Target Rs. 2,100 By Emkay Global Financial Services Ltd
SBI Life delivered an impressive performance during H1FY26, with APE growth at ~10% beating consensus’/our estimate by ~2%/4%, and VNB margin at 27.8% coming in higher than consensus’/our estimate of 27.3%/26.9%, respectively. The impressive VNB margin delivery was primarily driven by strong growth in the Protection (+33% YoY) and Non-Par (+16% YoY) segments. The management remains optimistic about the growth recovery in H2, driven by the GST rate cut, tweaks across certain schemes, and reengagement with channel partners. While GST ITC losses are expected to have a gross impact of ~174bps on VNB margin, the mgmt plans mitigating this via better operating efficiency and the product mix tilting more toward the protection and non-par segments. The mgmt re-iterated its guidance of Individual APE growth of ~13-14% in FY26, with margin expected to remain in the 26-28% range. Given the Q2 developments, we increase our APE estimate by ~2% while maintaining our VNB margin. Given its strong brand, distribution strength, and sustained performance delivery, we re-iterate BUY on SBI Life with unchanged Sep-26E TP of Rs2,100, implying FY27E P/EV of 2.2x.
APE as well as VNB margin beat estimates
During H1FY26, APE grew ~10% at Rs99.2bn and was 3.6% higher than our estimate, whereas for Q2FY26, APE at Rs59.5bn (+10.4% YoY) was higher than our estimate of Rs56bn. VNB margin at 27.8% (+1ppt YoY) during H1FY26 was higher than our estimate of 26.9%, primarily on account of strong growth in the protection and non-par segments. For Q2FY26, VNB margin at 28% beat our estimate of 26.5%. Resultantly, VNB at Rs27.5bn for H1 increased 14% YoY and was 7% ahead of our estimate, whereas for Q2FY26, VNB at Rs16.7bn grew ~15% YoY, coming in higher than our estimate. Embedded Value at Rs760bn rose 15% YoY, largely in line with our estimate of Rs757bn.
Limited impact from GST ITC losses; guidance reaffirmed
During H1FY26, VNB margin saw an impact of 80bps due to GST ITC losses; ~20bps of this stemmed from the policies sold after 22-Sep, while the balance 60bps impact was due to unavailability of ITC on renewal premium for policies sold in H1FY26, prior to the GST 2.0 implementation. For FY26, the mgmt expects VNB margin to see gross impact of ~174bps from ITC losses, though it aims to mitigate this through a) improved operating efficiency and b) shift in product mix toward higher-margin products (protection, non-par). Distributor commissions are likely to be stable. The management remains confident of growth recovery in H2, supported by the GST rate cut and certain product/channel adjustments. It reiterated its guidance of ~13-14% growth in Individual APE, while guiding for VNB margin to be rangebound at ~26-28%.
We re-iterate BUY with unchanged Sep-26E TP of Rs2,100
To bake in the Q2 developments, we tweak our estimates which results in ~2% increase in APE. We keep our VNB margin unchanged, though, which leads to ~2% increase in VNB over FY26-28E. Given its strong brand, distribution strength, and low-cost advantage, SBI Life is well-placed to deliver sustainable EV compounding. We reiterate BUY on the stock with unchanged Sep-26E TP of Rs2,100, implying FY27E P/EV of 2.2x.
For More Emkay Global Financial Services Ltd Disclaimer http://www.emkayglobal.com/Uploads/disclaimer.pdf & SEBI Registration number is INH000000354
