22 June 2018
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Today’s top research idea
ICICI Prudential Life Insurance: (Initiating Coverage) Moving up
the profitability curve
ICICI Prudential Life Insurance life is amongst the market leader in the private
sector life insurance space, aided by its strong brand, distribution capabilities
and product portfolio.
It has increased its market share in retail weighted premium to ~12% in FY18
(~6% in FY12) and has alongside reported sharp improvement in persistency
ratios. This coupled with change in product mix in favor of protection business
and strong cost control has enabled healthy margin expansion (16.5% VNB
margin in FY18 v/s 10.1% in FY17).
We expect margins to improve further to 18.2% by FY20E, boosting average
operating RoEV to ~20% over FY18-20E. We value IPRU at INR480 per share
using P/EV multiple of 2.7x (implied new business multiple of 21x).
Market snapshot
Equities - India
Close
Chg .%
Sensex
35,432
-0.3
Nifty-50
10,741
-0.3
Nifty-M 100
18,507
-0.6
Equities-Global
Close
Chg .%
S&P 500
2,750
-0.6
Nasdaq
7,713
-0.9
FTSE 100
7,556
-0.9
DAX
12,512
-1.4
Hang Seng
11,365
-1.2
Nikkei 225
22,693
0.6
Commodities
Close
Chg .%
Brent (US$/Bbl)
72
-1.5
Gold ($/OZ)
1,267
0.0
Cu (US$/MT)
6,789
0.4
Almn (US$/MT)
2,181
0.6
Currency
Close
Chg .%
USD/INR
68.0
-0.1
USD/EUR
1.2
0.3
USD/JPY
110.0
-0.3
YIELD (%)
Close
1MChg
10 Yrs G-Sec
7.8
-0.05
10 Yrs AAA Corp
8.6
-0.05
Flows (USD b)
21-Jun
MTD
FIIs
0.2
-0.7
DIIs
0.1
1.6
Volumes (INRb)
21-Jun
MTD*
Cash
293
310
F&O
17,570
8,369
Note: YTD is calendar year, *Avg
YTD.%
4.0
2.0
-12.4
YTD.%
2.8
11.7
-1.7
-3.1
-2.9
-0.3
YTD.%
8.5
-2.8
-5.8
-3.3
YTD.%
6.4
-3.3
-2.4
YTDchg
0.4
0.7
YTD
-1.1
8.9
YTD*
363
8,221
Research covered
Cos/Sector
ICICI Prudential Life Insurance
EcoScope
Key Highlights
(Initiating Coverage) Moving up the profitability curve
INR to touch 70 against the USD by 1HCY19
Piping hot news
India to raise duties on 29 goods from US
India will raise duties on 29 products from the US, striking back against
Washington’s move to impose higher tariffs on Indian steel and aluminium
exports amid a global trade war that’s broken out as President Donald Trump
seeks to combat what he perceives as unfair terms. The duties, which take
effect August 4, will mean $240 million additional revenue.
Chart of the Day: ICICI Prudential Life Insurance – Moving up the profitability curve
Strong growth in total premium collection
Expect VNB margin to improve to 18.2% by FY20E
Source: Company, MOSL
Source: Company, MOSL
Research Team (Gautam.Duggad@MotilalOswal.com)
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
Investors are advised to refer through important disclosures made at the last page of the Research Report.