Motilal Oswal Maintains Buy Recommendation on SBI Life Insurance, Sees Target Price of Rs 2400

SBI Life Insurance Research Report

Overview

SBI Life Insurance (SBILIFE) has consistently demonstrated strong growth, with a 15% Compound Annual Growth Rate (CAGR) in Annual Premium Equivalent (APE) for FY20-25, outpacing the industry's 6% CAGR. The company's extensive SBI branch network and large agent base have been key drivers of growth.

Growth Trajectory

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We expect SBILIFE's growth trajectory to remain stable at approximately 15% for FY26-28. The company is shifting its product mix towards higher-margin traditional products, aiming to reduce the share of Unit-Linked Insurance Plans (ULIPs) in individual APE from approximately 67% to 60%.

Product Mix and Protection

Protection business is growing significantly faster than the overall business, with the company targeting an increase in the share of protection in individual APE to 9.0-9.5%. As the product mix shifts towards traditional products, management expects the APE growth trajectory to further improve.

Operational Efficiency and VNB Margin

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The company's gradual shift towards higher-margin products, robust operational efficiency, and rising rider attachments are expected to maintain the Value of New Business (VNB) margin in the range of 26-28%. We expect the VNB margin to improve by 50 basis points (bp) YoY each in FY27/28, reaching 28.5% in FY28.

Financial Outlook

The sustained APE growth, stable VNB margins, and disciplined cost management position SBILIFE to achieve an operating Return on Embedded Value (RoEV) of approximately 18% going forward. We reiterate our BUY rating with a Target Price (TP) of INR2,400, based on 2.1x FY28E Price-to-Embedded Value (P/EV).