Target: ₹2,450

CMP: ₹1,436.35

SBI Life Insurance Company’s Q4-FY24 VNB margin stood at 28.1 per cent in-line with management guidance of 28 per cent but slightly below our FY24 estimate of 29 per cent. VNB margin was flat q-o-q vs 20bps/210bps contraction for HDFC Life/ICICI Prudential LIC, but contracted 200bps y-o-y due to a tilt in product mix towards ULIPs and a fall in the non-par and individual protection mix.

Q4-FY24 APE growth of 17 per cent y-o-y, expectedly remains comfortably ahead of HDFC Life’s decline of 8 per cent and IPRU’s growth of 9.6 per cent (albeit on higher bases).

Management expects FY25 APE growth to be around FY24 levels (17 per cent y-o-y). Full year FY24 VNB grew 9.5 per cent y-o-y and was below our expectation of 13 per cent. This was on account of the 90bps margin miss and high single-premium annuity mix ensuring that APE growth lagged that of NBP materially.

SBI Life expects to retain or improve margins in FY25, while it acknowledges that any improvement will depend on the shift in mix to protection and non-par from ULIP.

Valuations, at 2.1x FY25E P/EV are attractive given our expectation that a 20 per cent+ RoEV is sustainable. With 73 per cent upside potential, it remains our top pick across our BFSI coverage. Risks relate to any tectonic regulatory shifts and a material alteration in management structure.