SBI Group Debt-Free Stock Hits New High, Brokerages Bullish After Q1 Results

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The shares of SBI Life Insurance Company Ltd. opened today at Rs. 1,262.65, hit a record high of Rs. 1,304.70 on the NSE, and closed at Rs. 1,294.00 per share, an increase of 8.61% from the previous close of Rs. 1,191.45. The stock had hit a 52-week low of 1,003.50 on March 8, 2022, which means that after hitting a new high, it is currently trading 28.95% above the low. Brokerages HDFC Securities and Motilal Oswal are bullish on the stock after the company’s impressive first-quarter FY23 earnings. According to research by Value Research, SBI Life Insurance Company Ltd. is a debt-free company and brokerages expect the stock to hit a new high soon.

HDFC Securities said in a note that “SBILIFE reported a record adjustment. VNB margin at 30.4% (+670 bps) driven by a multiple increase in the NPAR savings mix at 29% (+22 bps ), leading to growth adj. VNB up 1.3x YoY to INR 8.8 billion (+62% vs. estimate) Total APE increased 31% vs. estimate (CAGR on 3 years at 15%), driven by growth trends ahead of the industry in personal protection, at 63% year-on-year. The company’s three growth levers remain in place: (1) the extensive network distribution (24,000+ branches), (2) a healthy mix of protection and NPAR, and (3) the lowest cost to income ratio among peers (EX22: 8.8%). VNB estimates of 12/11% to account for the pace of APE and VNB margins We expect SBILIFE to deliver a healthy APE/VNB FY22-24E CAGR of 18/25% e t retains BUY with an increased TP of INR 1,660 (although a lower multiple of 2.8 x Mar-24E as we advance our profits). »

The brokerage asserted that “Management remains confident in the growth outlook for NPAR savings in FY23E and has guided an approximate 25-30% share of NPAR savings in the mix. We expect the share of NPAR savings in the mix to moderate over the remainder of FY23E and expect pricing revision in a rising interest rate environment to lead to margin moderation VNB.”

While Motilal Oswal said in a note that “SBILIFE posted a strong performance in 1QFY23 with 80% YoY growth in APE as well as a strong 132% YoY increase in VNB. VNB margin increased by approximately 665 basis points year-on-year, fueled by a shift in the underlying product mix in favor of high-margin products such as Non-PAR and Protection.Despite volatility in capital markets, ULIPs increased by 33 % YOY All distribution channels contributed to the growth as well as an increase in the productivity of the banca and agency channels This led to a better cost ratio and SBILIFE continues to maintain its cost leadership. Persistence improved in all key cohorts.”

“We estimate a CAGR of 27% in APE in FY22-24. We further estimate that the VNB margin will remain stable from now to reach around 30% in FY24, thus enabling a VNB CAGR of 36%, while the RoEV will remain at around 22%. We maintain our Buy rating with a revised TP of INR 1,500 (based on 2.6x FY24E EV),” Motilal Oswal research analysts said.

Disclaimer: The opinions and recommendations made above are those of individual analysts or brokerage firms, and not of Mint.

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