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The three catalysts that will drive SBI Life shares higher, according to Goldman Sachs

market | Dec 6, 2022 11:07 AM IST

The three catalysts that will drive SBI Life shares higher, according to Goldman Sachs

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Goldman Sachs projects SBI Life's topline or Annual Premium Equivalent (APE) to increase at a compounded growth rate of 22 percent over financial year 2025.

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Brokerage firm Goldman Sachs has added SBI Life Insurance to its conviction list expecting its headwinds to abate in financial year 2024.
The firm lists continued market share gains, favourable interest rate trajectory and consensus upgrades as the three catalysts that will drive the company's shares higher going forward.
Goldman Sachs has raised its price target on SBI Life Insurance to Rs 1,600 from the earlier target of Rs 1,440, implying a potential upside of 25 percent from current levels.
Over the last three months, SBI Life has underperformed the Nifty 50 index by 7 percent. Goldman Sachs attributes this underperformance to investor concerns around slower topline growth, rising interest rates and evolving distribution regulations.
Based on its differentiated analysis on individual product market structures and the scope for monetising the SBI network, Goldman Sachs projects SBI Life's topline or Annual Premium Equivalent (APE) to increase at a compounded growth rate of 22 percent over financial year 2025. It also expects Value of New Business (VNB) margin to increase 110 basis points over the same period on better mix and operating leverage.
"We believe the market is under appreciative of the scope for market share gains and margin expansion," Goldman wrote in its note.
At 2.1 times price-to-enterprise value and 10 times price-to-value of new business, Goldman Sachs finds SBI Life's valuations to be attractive. In a bull case scenario, the potential upside of the stock increases to nearly 40 percent.
Among the key risks highlighted for the stock include the increase in banca channel costs, over dependence on ULIP segment and interest rate risk.
Shares of SBI Life Insurance are off opening highs, trading 0.3 percent higher at Rs 1,288.95.
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