Shares of SBI Life Insurance experienced a significant surge of over 9% during early trading on Friday, following the release of the company’s fourth-quarter results after market hours on Thursday. The stock peaked at ₹1,762, capturing investors’ attention as they reacted favorably to the insurer’s promising performance and future prospects.
Factors Behind the Stock Surge
The positive momentum in SBI Life’s shares can be attributed to optimistic evaluations from leading brokerages such as Nomura and Nuvama. Both firms have reiterated their Buy recommendations while raising their price targets for the stock, thanks to impressive growth in its Value of New Business (VNB), enhanced profit margins, and a well-rounded product strategy. Here’s a closer look at what these brokerages are saying.
Nomura’s Insights on SBI Life
Nomura has set a target price of ₹1,800, indicating a potential upside of nearly 12% from the current price. According to their analysis, SBI Life showcased remarkable performance in the March quarter, recording a 21% year-on-year increase in Annual Premium Equivalent (APE), alongside a 220 basis points expansion in VNB margins. This led to a 10% rise in VNB, a crucial profitability indicator.
- Key Highlights from Nomura:
- Expansion of margins linked to high-assurance protection products.
- Increased rider attachments to lower-margin products.
- Shift in product mix contributing to growth.
Notably, the protection segment of SBI Life saw a robust 22% growth, while non-participating (non-PAR) policies, which generally have higher margins, surged by 51%. Despite a 5.4% decline in ULIP contributions, the company aims to rebalance its offerings with a greater focus on traditional products in the upcoming fiscal year.
The insurer has projected an individual APE growth of 13-14% for FY26, driven by an expansion of its branch network and agent force, alongside increased overall investments.
Nuvama’s Perspective on SBI Life
Similarly, Nuvama has maintained its Buy rating on SBI Life, raising its target price to ₹1,890. The brokerage noted that while the overall APE growth was modest at 2.1% YoY, VNB margins significantly improved to 30.4% in Q4FY25, a rise of 332 basis points quarter-on-quarter.
- Key Insights from Nuvama:
- Q4 VNB rose 9.7% YoY, reaching ₹1,650 crore, surpassing estimates by 11.6%.
- Operating Return on Embedded Value (RoEV) stood at a strong 20.2% for FY25, reflecting solid operational performance.
Despite a notable decline in ULIPs during the quarter, the growth in non-PAR products and favorable assumption changes contributed positively to overall margins and VNB. Nuvama anticipates that SBI Life will continue to achieve steady APE growth of 13-14% in FY26, despite some expected challenges in the bank-led distribution channel.
In summary, SBI Life Insurance is witnessing a favorable market response, and with the backing of prominent brokerages, the outlook appears promising for the company moving forward. Investors are keenly monitoring these developments as they unfold.
