SBI life share price rallies 50% in 7 months; Q2 profit more-than-doubles; should you buy?

SBI Life Insurance Company shares have rallied nearly 50 per cent in seven months to Rs 774.40. Earlier this week, the insurance company posted 131 per cent on-year jump in Q2FY21 net profit at Rs 299.73 crore, as compared to Rs 129.84 crore in the year-ago. Total income rose 45 per cent to Rs 18,458.25 crore during the July-September quarter from Rs 12,745.38 crore in the corresponding period of the preceding year. Most of the brokerages have ‘buy’ rating to the stock with a potential upside of over 41 per cent. Assets under management (AUM) grew to Rs 1,86,360 crore  on-year from Rs 1,54,760 crore. Analysts at Nirmal Bang said that the company has stated that ULIP traction is far better and that people are coming back to buy ULIP products. “On YoY basis, average ticket size in the ULIP segment was higher,” it said.

The brokerage firm has pegged a target price of Rs 1,095 apiece. It will take SBI Life to jump 41.39 per cent to touch the price target. During the quarter, growth in individual protection and credit protection was higher. SBI Life has assessed the overall impact of the COVID-19 pandemic on its business and financials, including valuation of assets, policy liabilities and solvency for the period ended September 30, 2020.

SBI Life reported a new business premium (NBP) growth of 15 per cent on-year to Rs 7,820 crore in Q2FY21, however, the value of new business (VNB) remained flat at Rs 510 crore. Emkay Global Financial Services said that SBI Life is following Cardiff’s model on bancassurance distribution, making the bank sell insurance policies rather than driving sales through its own employees sitting in the branch. “With a further push for digitalization, management expects stability over operating expenses and a further improvement in the matrix,” it added. The brokerage firm has retained its buy rating to the stock with a 12-month target of Rs 1,006 apiece, implying a 30 per cent rally from the previous close. “Through a gradual shift toward profitable product mix and relatively comfortable valuations, we continue to like SBI Life in the insurance space,” it said.

SBI Life’s net premium income increased 22 per cent to Rs 12,857.95 crore during the quarter under review from Rs 10,111.51 crore a year ago. Analysts at Prabhudas Lilladher said that the recent sharp underperformance led them to upgrade SBI Life to buy. “We should see recovering business momentum of 12-13 per cent and better margin products drive VNB growth of 14 per cent over FY21-FY23 with much sharper recovery from FY22E onwards. It has given a target price of Rs 920 apiece.

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