Buy ICICI Prudential Life Insurance Company, target Rs 430: Nomura, India

Nomura India has a buy call on ICICI Prudential Life Insurance Company with a target price of Rs 430.

The current market price of ICICI Prudential Life Insurance Company is Rs 333.50.

Time period given by the brokerage is one year when ICICI Prudential Life Insurance Company price can reach the defined target.


Investment rationale by the brokerage:
IPRU, in its Mar-19 update, provided its APE and retail weight received premium (RWRP) trend for Feb-19 (before the IRDA monthly update). Its individual WRP business grew 8.4 per cent YoY (vs. 8.9 per cent growth in Jan-19), while overall APE grew 14.5 per cent YoY in Feb-19 (vs 16 per cent growth in Mar-19).

New business trend stabilising: 14.5 per cent YoY APE growth in Feb-19 was on a relatively benign base of 16 per cent contraction in new business in Feb-18. For 11MFY19, IPRU had a 1 per cent APE contraction in new business. We recently cut our growth expectations for IPRU to 3 per cent contraction in FY19F and just 8 per cent APE growth in FY20F.

IPRU is trying to diversify into smaller-ticket unit-linked insurance plans (ULIPs), which, we believe, will be a 12-month journey. In the interim, trends from Nov-18 indicate that the company has been able to at least arrest the APE decline, as it is focusing more on smaller-ticket ULIPs. The number of tickets has increased by nearly 25 per cent over the last 3 months on a YoY basis The recent move up in ICICI Prudential’s stock price from nearly 1.6x Sep-20F EV to 1.9x Sep-20F EV to some extent factors in the stability seen in APE growth trends, but valuations on an absolute basis remains reasonable, in our view, and stock factors in just 6-7 per cent long term VNB growth. However IPRU is in a transitory period (focusing on smaller-ticket ULIPs and SIP ULIPs), its growth is likely to underperform private peers; hence, growth catalyst could be missing in the near term. Our target price of Rs 430, which implies 33 per cent upside, is based on a 2.45x Sep-20F EV multiple.