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Pick Of the Week – SBI Life Insurance



We hereby present you our investment idea for Equity Investment i.e “Pick of the Week”. A thorough analysis of company, industry and economy goes behind our stock ideas for you. With the “Pick of the Week”, you may earn superior returns in stock market over a time horizon of 6 – 9 months.



INVESTING RATIONALE


SBI Life reported Q4FY19 PAT at Rs 4.6 bn (up 20.1% YoY), primarily on account of higher income from investments (Rs 41.5 bn - up 476.1% YoY). AUM increased 21.3% YoY to Rs 1,410.2 bn with equities constituting 23%, G-Secs 35%, debentures & bonds 33% and other securities the remaining share.

Value of New Business (VNB) grew strong 23.7% YoY aided by 150 bps YoY increase in VNB margin to 17.7% (up 20 bps QoQ) on rising share of protection business. Share of high-margin protection NBP (individual and group) has been consistently increasing from 5.2% in Q3FY18 to 13.4% of NBP in Q4 (up 136 bps QoQ).

SBI Life is a play on the under-penetrated Indian insurance market, superior distribution franchise, brand value and operating matrices at par with best in class. It has improved the product mix, consistently increased the Banca per branch productivity and cut down on cost ratios along with superior capitalization levels.

We maintain a BUY with a target of Rs. 776



WE RECOMMEND


  • CMP

    Rs. 699

  • Target Price

    Rs. 776

  • Potential Upside

    11%


* Note: Stock Investment horizon Approx. 6-9 months. CMP as on 7th June, 2019.

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