Jefferies has updated its stance on SBI Life Insurance Co Ltd (SBILIFE: IN), increasing the price target to INR1,960 from INR1,880 while maintaining a Buy rating.
The adjustment comes after an evaluation of the company's second-quarter performance for the fiscal year 2025.
SBI Life reported a Value of New Business (VNB) of Rs15 billion, a decrease of 3% year-on-year, yet surpassing estimates due to improved margins.
Despite this, the insurance provider experienced a modest 4% year-on-year premium growth. The slowdown was attributed primarily to reduced growth from SBI and other banking partners.
The analyst noted that while the company faces challenges from a high base effect, enhancing performance with banking partners is crucial to mitigate concerns. Additionally, public sector banks' slower deposit growth could potentially affect their ability to promote insurance sales.
Projections for SBI Life's VNB for fiscal years 2025 and 2027 have been slightly reduced. However, the firm is expected to achieve a compound annual growth rate (CAGR) of 15% in VNB from fiscal years 2025 to 2027 after a slower fiscal year 2024.
The valuation at 2.1 times the fiscal year 2026 Price to Embedded Value (P/EV) is considered reasonable by Jefferies.
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