Stock To Buy: SBI Life Can Give 43% Return, In Q1 Net Profit Up 18%, APE Grew 79.0% YoY: Emkay Global Suggests

Top brokerage firm Emkay Global recommends investors to buy the stocks of SBI Life Insurance, which has reported a 17.78% YoY gain in its net profit at Rs. 262.85 crore in Q1FY23, than Rs. 223.16 crore Q1FY22. SBI LIFE reported an impressive all-round performance in Q1FY23 with both growth and margins surprising positively. After the publication of its Q1 financial results, its share price surged by above 8% in the intra-day trading.

Stock To Buy: Target Price, Current Market Price

The Current Market Price (CMP) of SBI Life Insurance is Rs. 1191. Emkay Global has estimated a Target Price for the stock at Rs. 1710. This stock has the potential to give a 43.6% return, in the upcoming 1 year. This is a large-cap stock with a market capitalization of around Rs. 129,071 crore.

Stock Outlook
Current Market Price (CMP)	Rs. 1191
Target Price	Rs. 1710
Potential 1 year return	43.60%
52 week high share price	Rs. 6,135.00
52 week low share price	Rs. 3,218.10

In Q1, the company's new business premium (NBP) grew by 67% to around Rs. 5,590 crore. Driven by the exceptionally strong growth in non-par guaranteed saving products, SBI Life's VNB margins grew 6.7ppts YoY to 30.4%, while APE saw 79.0% YoY growth on a favorable base (3Y CAGR: 16.0%). Additionally, driven by its Return of Premium (ROP)-led individual protection offering, the company delivered an impressive 54% growth in retail protection APE YoY. However, the peers are struggling with declining retail protection.

Emkay Global says: Why Should You Buy This Stock?

"Management remained confident about delivering growth and maintaining margin trajectory. With its distribution channels firing on all cylinders, expanding product offerings and increasing acceptance, we expect robust growth to continue in FY23 and beyond. Based on the risk-reward proposition, SBI LIFE remains our top pick in the sector. Given the formidable combination of brand and distribution, SBI LIFE is among the best plays in the sector to deliver robust APE growth with sustained margin expansion. Based on risk-reward, SBILIFE is our top pick in the sector. In our view, notwithstanding the short-term volatility, SBILIFE is a classic EV compounding machine," Emkay Global reiterates 'Buy' rating.

In terms of overall APE growth and retail protection APE growth, SBI LIFE has bucked the trend of slowdown seen at peers. The solid Q1 performance underscores the strength of the formidable combination of brand and distribution reach in terms of geography and demography that SBI LIFE has.

Company portfolio: SBI Life

SBI Life strives to make insurance accessible to all, with its extensive presence across the country through its 952 offices, 18,515 employees, a large and productive individual agent network of about 146,057 agents, 50 corporate agents, a widespread bancassurance network of 14 partners, more than 29,000 partner branches, 114 brokers and other insurance marketing firms. Operating parameters, including persistency, product mix, distribution mix and cost ratios, were broadly stable or saw improvement. SBI LIFE remains the cost leader in the industry. With all its old warhorse distribution channels (SBI and agency) re-energized and performing strongly and new banca partners starting to perform well, the growth outlook is strong for the coming years. Management expects the current strong growth momentum to sustain.

Disclaimer

The above stock was picked from the brokerage report of Emkay Global. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.