Buy SBI Life Insurance Company; target of Rs 1644: Religare Retail Research
During the initial quarter of the fiscal year 2023-2024, SBI Life achieved significant progress with a notable 19% year-on-year upswing in its Gross Premium Income (GWP), amounting to an impressive Rs 135.6 billion. This remarkable growth was mainly driven by two key factors: a substantial surge of 28% YoY in Renewal Premium (RP) and a commendable 11% YoY increase in New Business Premium (NBP). Notably, this growth was achieved despite the backdrop of already strong growth figures from the previous year.
The surge in Renewal Premium indicates a robust retention of existing policyholders and reflects the trust and loyalty of customers in SBI Life’s insurance offerings. Simultaneously, the commendable growth in New Business Premium signifies the company’s ability to attract new customers and expand its market presence.
SBI Life’s impressive performance in the first quarter of FY23-24 underscores its position as a leading player in the insurance sector. The substantial increase in Gross Premium Income demonstrates the company’s ability to capitalize on market opportunities and deliver value to its stakeholders.
As the fiscal year progresses, SBI Life’s continued growth momentum positions it favorably in a competitive landscape, reaffirming its commitment to providing quality insurance solutions to its customers.
Although SBI Life’s overall performance was commendable in the first quarter of FY24, the growth in Annualized Premium Equivalent (APE) was relatively moderate, recording a 4% year-on-year increase. This was primarily attributed to the subdued growth in Individual Rated Premium (IRP), which saw a modest rise of only 3% during the same period.
The lower APE growth rate could be attributed to various factors, including market conditions, customer preferences, or competitive pressures. However, despite this moderate growth in APE, SBI Life demonstrated resilience and managed to achieve noteworthy expansion in its Gross Premium Income.
This feat was accomplished through a well-balanced combination of robust Renewal Premium (RP) growth and New Business Premium (NBP) growth. This strategic approach not only contributed to the company’s financial success but also solidified its position in the competitive insurance market.
The impressive performance of SBI Life in the first quarter of FY24 reflects its ability to maintain steady growth amidst changing dynamics in the insurance industry. By adapting to evolving market trends and responding to customer needs, the company showcased its agility and commitment to providing valuable insurance solutions. This adaptability is a vital quality for insurers as they navigate a dynamic and ever-changing business landscape.
While APE growth may have been more moderate, SBI Life’s comprehensive growth strategy, encompassing various revenue streams and customer segments, enabled it to achieve a robust Gross Premium Income.
This achievement underscores the company’s competence in sustaining its market position and capitalizing on opportunities for further growth. As the fiscal year progresses, SBI Life’s ability to navigate challenges and leverage its strengths positions it well for continued success in the insurance industry.
Based on comprehensive estimates and forecasts, a promising growth trajectory lies ahead for SBI Life over the period from FY23 to FY25E. The Annualized Premium Equivalent (APE) is expected to witness robust expansion at a Compound Annual Growth Rate (CAGR) of 19%, while the New Business Premium (NBP) is projected to grow at an impressive CAGR of 21%. Additionally, the Value of New Business (VNB) is anticipated to experience significant growth, with a CAGR of 23% during the same period.
Taking these positive projections into account, and recognizing the company’s potential for sustained growth, a Buy rating on the stock is maintained. This assessment signifies the belief in SBI Life’s capacity to continue its upward trajectory, capitalize on market opportunities, and deliver value to its shareholders.
Moreover, based on the revised estimates and the favorable outlook for the company, the target price has been increased to Rs 1,644. This valuation is grounded in a multiple of 2.6 times the company’s Embedded Value for the fiscal year 2024-2025 (FY25E).
The revised target price exemplifies the unwavering confidence in SBI Life’s growth prospects and underscores the conviction that the company will generate substantial value for its shareholders during the forecasted period. The insurance industry’s evolution and expansion further enhance the attractiveness of SBI Life as an investment opportunity in the market.
As SBI Life continues to build on its strong performance and navigate the evolving landscape of the insurance sector, it is well-positioned to seize opportunities, adapt to changes, and create long-term value for its stakeholders. The positive outlook and growth trajectory bode well for the company’s future, making it an appealing choice for investors seeking potential returns and stability in the insurance market.
