HDFC Securities is bullish on ICICI Prudential Life has recommended buy rating on the stock with a target price of Rs 445 in its research report dated July 25, 2019.
HDFC Securities' research report on ICICI Prudential Life
Despite an 87.7% YoY growth in protection, APE grew merely 5.3% YoY as ULIPs declined 6.1% YoY. Protection was driven by both indiv. and group, which grew 91.7% and 81.0% respectively. An increased protection share of 14.6% (+530bps vs. FY19), drove up VNBM to a stunning 21.0% (+400bps vs. FY19) and absolute VNB to Rs 3.1 (+29.9% YoY). Management stated that margin improvement was driven by product mix and not operating leverage as it estimated revenue growth conservatively. IPRU clarified that it is using estimated unit costs of FY20E for margin calculation. Additionally, reduced costs on the savings business aided margins. Renewal premium growth was low at 7.9% YoY as large pool of policies crossed 5 year completion. While mass lapse ratio has not increased surrender payouts increased and renewal premiums dropped. AUM increased 15.0/2.3% YoY/QoQ to Rs 1.64tn with 48% equity in mix. 1Q channel mix (APE): Banca/agency/direct/CA/group was at 52.4/21.2/12.8/6.8/6.8% of APE. Total cost/TWRP declined to 17.0% vs. 17.5% for FY19, while for the savings business the same improved substantially to 11.3% vs. 13.7% for FY19.
Outlook
While IPRU reported an APE growth of a mere 5.3% YoY, protection share grew to 14.6% (+530bps vs. FY19). This boosted VNBM to an unexpected 21.0% (+400bps vs. FY19) and absolute VNB to Rs 3.1 (+29.9% YoY). We upgrade IPRU to a BUY with a TP of Rs 445 (Jun-20 EV + 19.0x FY21E VNB).
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