SBI Life share price: Buy SBI Life Insurance Company, target price Rs 1370: HDFC Securities

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HDFC Securities bought a call option on Insurance Company Ltd. with a target price of Rs 1370. The current market price of SBI Life Insurance Company Ltd. is Rs 1172.

The period given by the analyst is six months when the price of SBI Life Insurance Company Ltd. can achieve the defined goal.

SBI Life Insurance Company Ltd., incorporated in the year 2000, is a large cap company (with a market capitalization of Rs 117 407.07 Crore) operating in the financial services industry.

Major products / revenue segments of SBI Life Insurance Company Ltd. include the amount transferred from the policyholder’s account, interest, dividends and rents and profit / loss on the sale / redemption of investments for the year ending March 31, 2020.

Finance
For the quarter ended 30-06-2021, the company reported stand-alone total income of Rs 243.50 crore, down -83.17% from last quarter total income of Rs 1,446.43 crore and in -35.70% decrease from same quarter last year Total income of Rs 378.67 Crore. The company reported after-tax net profit of Rs 223.16 Crore in the last quarter.


Justification of the investment
Even during the weak economic scenario, the company posted decent numbers in Q1FY22. SBIL deserves higher valuation given a diverse product mix, strong distribution and focus on improving persistence. The brokerage firm estimated that SBI’s lifetime would provide a 20% CAGR for New Business Value (VNB), 16% New Business Premium (NBP) and 16% for Embedded Value (EV) during fiscal years 21 to 23 E. The company is trading at 2.5x the embedded value FY23, which is a steep discount to its HDFC Life counterpart. Given the high growth environment, he believes Indian life insurance companies will continue to achieve higher multiples. SBI Life offers quality at attractive valuations due to its better cost ratio, improved persistence and strong premium growth which ensure the continuity of strong operational performance. Its margin widened in FY22, but it still lags behind its peers and therefore has a lot of room for improvement over the next two years.

Promoter / FII Holdings
The promoters held 60.7% of the company’s capital as of September 30, 2020, while the FIIs held 25.8%, the DII 7.1% and the public and others 6.5%.

(Disclaimer: The opinions and recommendations given in this section are those of the analysts and do not represent those of ETMarkets.com. Please consult your financial advisor before taking any position in any of the stocks mentioned.

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