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ICICI Prudential Life (IPru Life) reported NBP/APE growth of 23%/27% YoY in Q4FY21, following 3 straight quarters of decline. March month’s APE growth of 108% YoY was a standout. This acceleration in momentum (key to stock re-rating) is driven by both its enhanced product suite as well as its augmented distribution capabilities. FY21 VNB margin improved 340bps to 25.1%, primarily through business mix (higher share of annuity/protection). Growth expectations bolstered by ULIP recovery (11% YoY in Q4) should drive VNB. Positive investment variance (11% of FY20 EV) drives 10%/8% upgrade in FY22E/23E EV. Maintain ‘BUY’ with revised TP of Rs 790 (Rs 720 earlier; multiple unchanged at 3.4x FY22E P/EV).
ULIP has grown YoY after a straight seven quarter gap, while sales of non-linked savings and annuity continued to clock robust performance. Protection dipped 3% in Q4FY21 as near-term headwinds in the form of price hikes and reluctance for medical check-ups affected retail momentum. However, IPru Life plans to compensate for this by increasing attachment of riders and higher traction on group segment. Adding bank partners like IDFC First, Indusind, RBL and AU has started paying off as contribution of non-ICICI Bank partners jumped >2x from 5% of APE in FY20 to 11% in FY21. While sales from ICICI Bank had been slow for 9mFY21, even this channel ended Q4FY21 with a 50% YoY jump. Agency, direct & partnerships also printed strong growth of their own; a true example of broad spectrum growth delivery.
Outlook and valuations: Growth resumption; maintain ‘BUY’ ULIP growth in earnest may require cyclical support, but market share recapture in the same and resumption of protection momentum seem likely. At CMP, the stock trades at an attractive 2.0x P/EV FY22E.