The stock of SBI Life Insurance rose by over 3% at the beginning of trade following Jefferies' optimistic rating. The brokerage maintained a Buy rating and assigned a target value of Rs 2,270, representing a 23% upside.
According to Jefferies, the Value of New Business (VNB) in the company was Rs 170 crore in the Q2, representing a 14% increase over the previous year. Analysts have noted that this growth was achieved through a more favorable product mix and the addition of protection to savings plans.
Furthermore, the Individual Annualized Premium Equivalent (APE) grew moderately, at 6% in the first half and slightly faster in September, in line with the company's growth target for FY26 of 13-14%.
The brokerage also noted that group savings products were more attractive, increasing by 145% in the quarter, which added approximately 5% to APE. Jefferies notes that these elements indicate a robust business model and effective management execution by SBI Life.
Jefferies pointed out that SBI Life was under pressure from the GST reform in India but had high margins. The brokerage claimed that margins rose by about 100 basis points, assessed on a year-on-year basis, to 28%, supporting 14% growth in VNB.
The GST effect in the first half was 80 basis points on margins, of which 20 basis points were on sales after September 22. The analysts noted that these costs were well-absorbed by the company, maintaining stable profitability. With the optimistic premium mix and increased protection attachments, the impact of GST on SBI Life management is expected to be limited to 20-30 basis points on margins, as of FY26.
According to Jefferies, the valuation of SBI Life is positive in comparison to its growth opportunities. The stock is priced at 13x the 12-month forward P/VNB by the broker, which indicates a chance to be re-rated since the growth and stability of the margin are still premium.
The company estimates a 14% compound annual growth in VNB over FY26. The margins are expected to remain in the 26–28% range, and the reported return on embedded value (ROEV) is 17% in FY27. Analysts view these indicators as beneficial to further increases in share price and shareholder demand.