ICICI Prudential Life 4QFY21 Results Review Report - Strong micro; challenging macro - HDFC Securities

Mr. Krishnan ASV, Institutional Research Analyst, HDFC Securities

While IPRU closed FY21 on a positive note (4QFY21 APE growth 14% ahead of expectations), FY21 APE clocked a 12.5% YoY decline. We like IPRU's re-engineered business model, which is focused on a more diversified product and channel mix, industry-leading share of protection (FY21: 13%) and rising share of traditional products (FY21: 34.8%). With the share of protection in the mix expected to moderate in FY22E/23E, we expect VNB margins to contract over FY22-23E to 24.7-24.9%. We expect VNB to grow at FY21-23E CAGR of 13%. We retain our ADD rating with an unchanged DCF-derived target price of Rs 575 (Mar-22 EV + 25.5x Mar-23E VNB). The stock is currently trading at FY22/23E P/EV of 2.0/1.8x and P/VNB of 20.2/16x.

4QFY21 highlights: Total APE grew 27/51% YoY/QoQ to INR25.1bn, registering a 14% beat led by a rebound in growth in Mar-21 (~100% YoY/0.2% 2yr CAGR). Despite individual/group protection growth at 20/48% sequentially, the share of protection moderated to 13.6% (-420/-180bps YoY/QoQ). Group protection continues to see strong growth at 35/48% YoY/QoQ on the back of increased group term insurance and credit protect. Growth in retail protection moderated as the company focused on risk management in a pandemic-hit environment. In recent quarters, banca partners other than ICICIBC have shown strong growth momentum. VNBM for FY21 was at 25.1% (+340bps) largely on account of 1) positive business mix driven by higher share of NPAR and protection (+390bps); 2) expense change (+20bps); and 3) yield curve movement (-70bps). The company raised its Covid reserves to INR3.3bn (vs. INR1bn as of Dec-20).

Persistency for 11MFY21 improved across cohorts in the range of 190-480bps, with persistency improving even for ULIPs. EV grew 26.4% YoY largely on account of positive investment variance.

Outlook: After demonstrating a sub-par growth in FY21, we find the management's retained guidance around doubling its FY19 VNB by FY23E unconvincing. We expect IPRU to deliver APE/VNB 13.4/13.0% CAGR over FY21-23E. APE growth will be largely supported by recently-added banca partners and newly-launched annuity products.

Shares of ICICI Prudential Life Insurance Company Ltd was last trading in BSE at Rs.478.3 as compared to the previous close of Rs. 452.25. The total number of shares traded during the day was 1507681 in over 39997 trades.

The stock hit an intraday high of Rs. 503.95 and intraday low of 462.35. The net turnover during the day was Rs. 740651842.

Source : Equity Bulls

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