Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
SBI Life enjoys strong bancassurance support from its parent SBI, India's largest public sector
bank. As a result, it enjoys an unmatched, low-cost distribution reach that helps insulate it from
the challenging business environment. On a higher valuation for SBI Life, we raise our target
price for SBI and maintain Buy.
SBI Life: Network expansion likely to continue
As life insurance is a retail-oriented business, investment in network is critical to sustain growth.
Since its inception, SBI Life has leveraged SBI’s branch network to develop a profitable, capitalefficient
business model and maintained its profitability ratios in FY11, despite the new ULIP
guidelines having weighed on business volumes. Bucking the industry trend, the insurer
continued expanding, adding 140 branches (taking it to 630 at end-FY11) and 10k agents (taking
it to 80k). Going forward, SBI Life plans to continue investing in network (aiming to add 80
branches in FY12), which, in our view, augurs well for its long-term growth.
SBI Life: Expense management critical but not at the top of the agenda
SBI Life benefits from one of the lowest-cost distribution networks in the sector: in FY11, its
opex/GWP was, at 6.9%, the second lowest, after LIC. This helped it contain new business strain,
turning profitable ahead of others and emerging as one of the most efficient insurers in terms of
policyholders’ assets managed/capital deployed (39x). In FY11, it generated ROE of around 25%.
Management plans to remain in investment mode, aiming for opex growth of over 15% in FY12-
FY13 and to grow new business by 15%. In our view, given its low-cost model, SBI Life is well
positioned to swim against the tide and gain market share as other insurers adjust their business
models.
We increase our target price for SBI on an increased valuation for SBI Life
SBI Life benefits from its parent’s strong branding and distribution capabilities, which give it a
competitive and sustainable edge over peers, with the lowest operating ratios among private
insurers. Management has set an aggressive agenda of expanding during FY12 to support future
growth. We increase our valuation of SBI Life to Rs131bn (from Rs65bn) at 2.1x FY12F EV, 6.6x
FY12F BV, ie, from Rs76 per share to Rs154 per share of SBI. As a result, our target price for
SBI increases to Rs 2,852 per share from Rs2,774. We maintain our Buy rating. Given SBI Life’s
dependence on the captive bancassurance model, the key downside risk, in our view, would be a
decision by the regulator to allow multiple tie-ups for banks
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
SBI Life enjoys strong bancassurance support from its parent SBI, India's largest public sector
bank. As a result, it enjoys an unmatched, low-cost distribution reach that helps insulate it from
the challenging business environment. On a higher valuation for SBI Life, we raise our target
price for SBI and maintain Buy.
SBI Life: Network expansion likely to continue
As life insurance is a retail-oriented business, investment in network is critical to sustain growth.
Since its inception, SBI Life has leveraged SBI’s branch network to develop a profitable, capitalefficient
business model and maintained its profitability ratios in FY11, despite the new ULIP
guidelines having weighed on business volumes. Bucking the industry trend, the insurer
continued expanding, adding 140 branches (taking it to 630 at end-FY11) and 10k agents (taking
it to 80k). Going forward, SBI Life plans to continue investing in network (aiming to add 80
branches in FY12), which, in our view, augurs well for its long-term growth.
SBI Life: Expense management critical but not at the top of the agenda
SBI Life benefits from one of the lowest-cost distribution networks in the sector: in FY11, its
opex/GWP was, at 6.9%, the second lowest, after LIC. This helped it contain new business strain,
turning profitable ahead of others and emerging as one of the most efficient insurers in terms of
policyholders’ assets managed/capital deployed (39x). In FY11, it generated ROE of around 25%.
Management plans to remain in investment mode, aiming for opex growth of over 15% in FY12-
FY13 and to grow new business by 15%. In our view, given its low-cost model, SBI Life is well
positioned to swim against the tide and gain market share as other insurers adjust their business
models.
We increase our target price for SBI on an increased valuation for SBI Life
SBI Life benefits from its parent’s strong branding and distribution capabilities, which give it a
competitive and sustainable edge over peers, with the lowest operating ratios among private
insurers. Management has set an aggressive agenda of expanding during FY12 to support future
growth. We increase our valuation of SBI Life to Rs131bn (from Rs65bn) at 2.1x FY12F EV, 6.6x
FY12F BV, ie, from Rs76 per share to Rs154 per share of SBI. As a result, our target price for
SBI increases to Rs 2,852 per share from Rs2,774. We maintain our Buy rating. Given SBI Life’s
dependence on the captive bancassurance model, the key downside risk, in our view, would be a
decision by the regulator to allow multiple tie-ups for banks
No comments:
Post a Comment