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Shares of SBI Life Insurance Company Ltd. today they opened at Rs. 1262.65, touching an all-time high of Rs. 1,304.70 on the NSE, and closed at Rs. 1,294.00 per share, up 8.61 percent from the previous close of Rs. 1,191.45. The stock market hit a 52-week low ₹1,003.50 on March 8, 2022, meaning it is now 28.95% higher than the low after reaching a new high. Brokerage houses HDFC Securities and Motilal Oswal are bullish on the stock following the company’s impressive Q1FY23 earnings. According to the research of Value Research, SBI Life Insurance Company Ltd. The company is debt-free, and brokerage houses expect the stock to reach a new high soon.
HDFC Securities said in a note that “SBILIFE reported an all-time high adj. VNB rate at 30.4% (+670bps) on the back of a multiple increase in NPAR savings mix to 29% (+22pps), driving adj. VNB 1 ,3x YoY higher than INR8.8bn (+62% vs. estimates). Total APE grew 31% ahead of estimates (3y CAGR at 15%), driven by better industry growth in sales protection, at 63% YoY. The company’s three growth drivers remain in place: (1) SBI’s massive distribution network (24k+ branches); (2) healthy mix of protection and NPAR; and (3) lowest opex ratio among peers (FY22 : 8.8%). We increase VNB estimates by 12/11% to factor in APE and VNB margins in the hit. We expect SBILIFE FY22-24E APE/VNB CAGR to be healthy with Deliver 18/25% and keep BUY at a high TP of INR1,660 (even though the multiple is lower at 2.8x Mar-24E as we move forward with earnings).
The brokerage claimed that “Management remains confident on the NPAR savings growth outlook for FY23E and has guided for 25-30% of NPAR savings in the mix. We expect the share of NPAR savings in the mix in the remaining period.” of FY23E to moderate and expect repricing in a high interest rate environment to moderate VNB’s margins.”
While Motilal Oswal said in a note that “SBILIFE posted a strong showing in 1QFY23 with 80% YoY growth in APE with a solid jump of 132% YoY in VNB. VNB margin increased ~665bp YoY due to a shift in product mix primarily in favor of high margin products such as Non-PAR and Protection. Despite volatility in the capital markets, ULIPs grew by 33%. All distribution channels contributed to the growth along with increased productivity of banking and agency channels. This led to a better cost ratio. and SBILIFE continues to maintain cost leadership. Sustainability across all major groups has improved.”
“We estimate 27% CAGR in APE over FY22-24. We further estimate VNB’s margin to remain stable thereafter to reach 30% in FY24, thus enabling 36% VNB CAGR, while where RoEV remains at ~22%. We maintain our BUY rating with a revised TP of INR1,500 (based on 2.6x FY24E EV),” Motilal Oswal research analysts said.
Statement: The views and recommendations made above are those of individual analysts or brokerage firms, and not those of Mint.
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