Emkay Global Financial’s recommendation to buy SBI Life and their target price of Rs. 1690, as outlined in their research report dated September 13, 2023.
SBI Life: A Positive Growth Trajectory
SBI Life has been demonstrating a strong performance in its Retail new business during July and August 2023. Despite this, the stock has not seen significant movement, largely due to investor concerns regarding whether this growth is driven by Unit Linked Insurance Plans (ULIPs) and whether it will put pressure on margins.
Addressing Investor Concerns
However, Emkay Global Financial’s research report suggests that these concerns may be unfounded. Their channel checks and discussions with the company have provided insights that indicate SBI Life is on track to achieve approximately 20% growth in Retail Annual Premium Equivalent (APE) in FY24 while maintaining a Value of New Business (VNB) margin of around 29%. This indicates that the company is effectively managing its growth while preserving profitability.
Strength in Franchise and Distribution
SBI Life’s strength lies in its franchise and distribution capabilities, powered by strong brands and an extensive distribution network. This advantage positions them well to distribute a variety of life insurance products, contributing to their growth potential.
Revised Outlook
Given the positive outlook and addressing investor concerns, Emkay Global Financial has made upward revisions to their projections. They have increased their estimates for APE and VNB for FY24-26 by approximately 2-3% each.
Emkay Global Financial’s Recommendation
In light of these positive developments and revised projections, Emkay Global Financial reiterates their “BUY” rating on SBI Life. They have set a target price of Rs. 1690 per share for September 2024 (FY25 Estimated Price-to-Earnings on Embedded Value: 2.6x).
In summary, SBI Life’s strong growth performance in its Retail business, coupled with its ability to maintain margins, positions it favorably for the future. Emkay Global Financial’s “BUY” rating reflects their confidence in the company’s potential, and the target price of Rs. 1690 suggests room for further appreciation in the stock’s value.
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