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SBI Life achieved good results for H1FY24, with 20.9% YoY APE growth and VNB margins remaining intact at 28.6% (Emkay Est.: 28%; H1FY23: 31%) led to VNB standing at Rs23.6bn (+11.3% YoY)—a minor beat on our estimate. Against the backdrop of increased share of ULIP in the product mix (+6.4ppts YoY) and reduced share of non-par savings (-8.2ppts YoY), this margin softness is on expected lines. A notable feature of SBI Life’s playbook is that it continues its superb execution by leveraging on its brand, distribution and cost advantage to sell products that meet customer & channel demand. Management reiterated its guidance to grow the topline to around 20%, whereas VNB margin is expected to remain at 28-30% levels, depending on the product mix. Our FY24- 26 estimates remain broadly unchanged and we reiterate our BUY opinion on the stock, with unchanged TP of Rs 1,690/share (implied FY25E P/EV of 2.6x).

Delivers double-digit VNB growth; margin compression not surprising

SBI Life reported a robust 20.9% APE growth to Rs 82.6bn (Emkay: Rs81.1bn) during H1FY24, driven by resilient growth in the ULIP and Protection segments. Despite the higher share of ULIPs, the company reported 28.6% VNB margin during H1FY24—beating our expectation of 28%. The healthy growth in APE and stable VNB margin resulted in VNB growing 11.3% YoY to Rs23.6bn as against our expectation of Rs22.7bn. EV at Rs512.6bn was in line with our estimates, having grown ~11% over FY23. PAT at Rs7.6bn (+19% YoY) stood slightly lower than our estimate of Rs7.8bn during H1FY24. Persistency saw an improvement across cohorts, whereas the commission ratio saw some moderation, given higher sales of ULIP products.

Execution of profitable growth continues; Guidance reaffirmed

SBI Life has consistently executed well by leveraging on its core strengths — brand, distribution and cost. Management has always believed in keeping the life insurance proposition simple by selling the products that cater to customer and distributor demand in the prevailing difficult economic environment. ULIP products saw a robust growth during H1FY24 resulting in increased share in the APE product mix at 56% driven by the movement in the equity markets. On the Protection front, credit life continued to do well, whereas the individual protection vertical is expected to pick up pace, with launch of ROP products that are in the pipeline. While ULIPs continue to drive the product mix, Management remains focused on the non-par savings and protection business. Given its strong brand, warhorse distribution network, low-cost advantage and a simple business strategy, Management has reaffirmed ~20% APE growth and ~28-30% VNB margin guidance for FY24

We reiterate BUY, with broadly unchanged estimates

To build-in the Q2FY24 performance, we have marginally tweaked our estimates which leads ~1% increase in FY24-26E APE; however, we keep our VNB margin unchanged. We reiterate our BUY recommendation on the stock, with our target price remaining Rs1,690/share, implying FY25E P/EV of 2.6x.

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