SBI Life extends rally on strong June quarter earnings

Shares of SBI Life Insurance Company were trading 3 per cent higher at Rs 838 per share on the BSE on Friday, extending a 5 per cent rally seen on Wednesday, in an otherwise weak market on expectations of strong growth outlook. The stock was trading at its highest level since it got listed at the exchanges on October 3, 2017. During the past six months, it has rallied 48 per cent, as compared to a 5 per cent rise in the S&P BSE Sensex.

SBI Life reported a strong set of results in the April-June quarter (Q1FY20), with 49 per cent year-on-year (YoY) growth in new business value (NBV). The Annualized Premium Equivalent (APE) grew 41 per cent YoY, and margins improved 90 basis points (bps) YoY to 17.9 per cent, on improved protection mix.

The numbers in the recently concluded quarter beat analysts' estimates.

For FY20, analysts at JP Morgan expect a NBV growth of 41 per cent YoY, to Rs 2,420 crore, leading to EV growth of 18 per cent YoY, to Rs 26,400 crore. Further, lower bond yields and potentially positive operating variance with improving persistency could provide favorable results.

The brokerage firm sees strong demand for the stock among emerging market investors on the back of strong growth, which it says, is exceeding most Asia’s life companies’.

"The share overhang risk from promoter stake sale persists, but fundamentals remain solid, it added. The brokerage firm has ‘overweight’ rating on the stock with March 2020 target price of Rs 1,000 per share.

“Given the strong distribution footprint of its parent SBI (24k+ branches), improving protection share (1QFY20: 11.2 per cent), lowest operating cost ratios (11.2 per cent), improving margins (VNBM: 19.9 per cent) and tailwinds from financialisation of savings we expect SBI Life to deliver strong FY19-22E VNB CAGR of 19.8 per cent p.a. and RoEVs of around 17.5,” analysts at HDFC Securities said in result review with ‘buy’ rating on the stock and target price of Rs 914 per share.

At 10:47 am, SBI Life Insurance was trading 2.7 per cent higher at Rs 834 on the BSE, as compared to a 0.3 per cent decline in the S&P BSE Sensex. A combined 7,05,253 shares have changed hands on the counter on the NSE and BSE so far.

State Bank of India