ICICI Direct Places Buy Call On Two Large Cap Life Insurance Stocks, Sees Gains Up To 21%

ICICI Direct in its recent report on two Insurance sector stocks - SBI Life Insurance Company Limited & HDFC Life Insurance Company Limited - have suggested buy for potential gains of up to 21%. Both the insurance stocks are large cap stocks. Here are details of the report along with the stock outlook

SBI Life (SBIL)

SBI Life (SBIL) is among the most dominant players in the Indian life insurance industry with strong distribution network, parentage, operating metrics. Balanced product mix with focus on opex ratio ahead of industry. Strong parentage-led distribution remains key catalyst.

SBI Life - Q2FY23 Results

Premium accretion slower; earnings came ahead of estimates. Gross premium growth slower at 12% YoY; NBP growth at 8% YoY. VNB margins up 630 bps to 31%, aided by change in product mix. PAT at Rs 377 crore, up 53% YoY led by healthy surplus in Q2FY23. AUM growth was decent at 16% YoY to Rs 282630 crore.

SBI Life - Buy for a target price of Rs 1500

SBIL's share price has grown ~44% in the past three years. Continued strong growth guidance supported by distribution strength (including SBI YoNo), improving high margin product mix should aid overall value. The stock is reasonably priced and currently trades at 2.5x FY24E embedded value. "We retain our BUY rating on the stock. We continue to value SBIL at ~2.8x FY24 EV and maintain our target price at Rs 1500 per share," the brokerage has said.

 

SBI Life - Stock outlook

According to the brokerage's given a target price of Rs 1500, the stock is likely to gain 21% from its current level. The stock's current market price is Rs 1,251.90 per share on NSE, it opened at Rs 1,261.60 per share.

It has given 2.69% positive return in a week, whereas, in a month, it fell by 1.66%. Over a year, the stock gave 10.82% positive return. It has given 27.47% positive return in the past 3 years. In the past 5 years, it has given 86.88% positive return.

The stock's ROE is 12.95%. The stock recorded its 52 week low level on 08 March 2022 at Rs 1,003.50 and the 52 week high at Rs 1,340.35 on 8 September 2022, respectively.

 

 

HDFC Life

HDFC Life is among the most dominant players in the Indian life insurance industry with a strong distribution network, parentage, operating metrics. Balanced product mix with focus on non-par, protection & annuity business. Industry leading VNB margins of ~26-27%.

HDFC Life - Q2FY23 Results

Premium accretion slower; better surplus aid PAT. NBP (pre-merger) grew at slower pace of 5% YoY at Rs 10923 crore in H1FY23. VNB margins (pre-merger) healthy at 27.6%, led by balanced product mix. Persistency improved for 13th , 61st month to 88%, 54%, respectively. PAT at Rs 26.2 crore, up 19% YoY, aided by better surplus.

HDFC Life - Buy for a target price of Rs 635

HDFC Life's share price has given modest return of just over 6% in the past three years. Focus on diversified business growth, confidence on Exide acquisition provides comfort on fundamental strength. "We retain our BUY rating on the stock Target Price and Valuation: Insurance under penetration coupled with focus on product mix to aid healthy business growth and VNB margin. However, integration of Exide Life and uncertainty on stake of parent acts as near term deterrents. We continue to value HDFC Life at 2.9x FY24E EV with target price maintained at Rs 635," the brokerage has said.

HDFC Life – Stock Outlook

The brokerage has given a buy call with target price of Rs 6345 per share, sees a potential upside of 19% from current level. On NSE, the stock is currently trading at Rs 536.60 per share, down 0.91% from its previous close. Today, it opened at Rs 544.35 per share.

It has given 1.07% positive return in a week, whereas, in 1 month, it fell by 0.46%. Over a year, the stock fell by 21.41%. It has given a 12.05% negative return in the past 3 years. The stock was listed on the stock exchange on 17 November 2017. Since its listing, it has given 55.88% positive returns on investments

The stock's ROE is 8.50%, which is below its counterpart SBI Life. The stock recorded its 52 week low level on 08 March 2022 at Rs 497.05 and the 52 week high on 15 November 2021 at Rs 723.95, respectively.

 

Disclaimer

The stocks have been picked from the brokerage report of ICICI Direct. Greynium Information Technologies, the Author, and the respective Brokerage house are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before making any investment decision.