SBI Life Insurance Company Ltd. share price target

AUM growth remained healthy at 22% YoY to | 164190 crore. Income from investment surged at | 4073 crore in Q3FY20, leading to higher trajectory in topline. Operating expenses (commission and opex related to insurance business) grew 23.8% YoY in Q3FY20 to | 1097 crore. Led by robust...

Given the strong distribution footprint of its parent SBI (24k+ branches), improving protection share (9MFY20: 8.0%, +174bps YoY), lowest operating cost ratios (9.1%), and improving margins (VNBM: 20.5%) we expect SBILIFE to deliver strong FY19-22E VNB CAGR of 23.3% p.a. and RoEVs of ~18-18.5%. Lower than expected growth and protection share remain a key risk to our call. SBILIFEs 3QFY20 performance was a mixed bag, as NBP/APE growth was strong at 26.8/16.3% YoY; however decline in protection/NPAR share to 6.8/5.7% (-27/-573bps QoQ) was disappointing. Strong 9MFY20 adj. VNBM at 20.5% (+30bps vs. 1HFY20) compensated. SBILIFE is our top BUY with a TP of Rs 1,230 (Dec-20 EV + 25.4x Mar-22E VNB).

Broking While competitive intensity remains intense, the quarter witnessed default by Karvy stock broking resulting in SEBI action of debarring the broker to add clients and restricting client trades. This has resulted in risk aversion with retail investors fleeing Karvy for other larger retail brokers. We expect this trend to continue for 1-2 quarters and be beneficial for bank owned brokers. Life insurance and mutual funds Pvt. life insurers continued to grow in 3QFY20, with individual NBP/APE growth of 18.8/16.3% in 3QFY20. On the other hand, equity (ex arbitrage and ETF) flows for 3QFY20 were muted at Rs 26bn (-90.8% YoY).

Retain BUY with an increased TP of Rs 1,230 (+23.4%) implying a DCF derived Dec-20E EV + 25.4x FY22E VNB. SBILIFE continues to be our top pick in the life insurance space. Retain BUY with an increased TP of Rs 1,230 (+23.4%) implying a DCF derived Dec-20E EV + 25.4x FY22E VNB. SBILIFE continues to be our top pick in the life insurance space. Our recent interaction with SBILIFE convinced us that growth surprises will persist. Increasing width (and depth) at activating SBIs branch network and SBILIFEs new partner addition initiatives drive our conviction. Further, a higher than expected APE growth in 8MFY20, leads us to upgrade FY20E-22E APE by 3.4-7.2%.

SBI Life Insurance Company Limited, is a joint venture between SBI and BNP Paribas formed in 2001, which offers individual and group insurance plans, including traditional and unit linked plans. Its products cover life, health,...

Given the strong distribution footprint of its parent SBI (24k+ branches), improving protection share (1HFY20: 8.8%, +340bps YoY), lowest operating cost ratios (10.4%), improving margins (VNBM: 20.2%) and tailwinds from financialisation of savings we expect SBILIFE to deliver strong FY19-22E VNB CAGR of 20.1% p.a. and RoEVs of ~17.3%. Lower than expected growth and protection share remain a key risk to our call. SBILIFEs 2QFY20 performance continues to be strong with NBP/APE growth of 33.8/48.3%. 1HFY20 VNBM came in at 20.2% (+40bps vs. FY19) and VNB at Rs 5.7bn (+24.6% YoY). SBILIFE is our top BUY with a TP of Rs 940 (Sep-20 EV + 21.1x Sep-21E VNB).

Income from investment was healthy YoY but dipped QoQ to | 2623 crore in Q2FY20. Led by robust premium accretion, opex ratio has dipped to 6.5% in H1FY20 vs. 7.8% in H1FY19. Healthy accretion in premium led to higher policyholder surplus at | 349 crore but higher allocation to policyholders at | 293 crore and provision of | 67 crore relates to exposure to DHFL kept earnings lower than our estimate at | 130 crore. Persistency witnessed...

SBI Life Insurance Company Limited, is a joint venture between SBI and BNP Paribas formed in 2001, which offers individual and group insurance plans, including traditional and unit linked plans. Its products cover life, health,...

Given the strong distribution footprint of its parent SBI (24k+ branches), improving protection share (1QFY20: 11.2%), lowest operating cost ratios (11.2%), improving margins (VNBM: 19.9%) and tailwinds from financialisation of savings we expect SBILIFE to deliver strong FY19-22E VNB CAGR of 19.8% p.a. and RoEVs of ~17.5. Lower than expected growth and protection share remain a key risk to our call. After a strong FY19, SBILIFE continues to deliver strong performance with NBP growth of 52.7% and VNBM of 19.9% (+10bps over FY19). SBILIFE is our top BUY with a TP of Rs 914 (Jun-20 EV + 22.1x FY21E VNB).