According to analysts at global brokerage and research firm Morgan Stanley, following the fall in stock prices, insurance sector stocks are now offering a better risk-reward setup. “The VNB CAGR for our covered life insurers may be 12-28% for FY20-22, which is characterized by epidemic and retail protection recession. Thus, life insurers have shown the ability to adapt and grow through a difficult phase. The economy has the potential to improve, “said Morgan Stanley in a statement. Brokerage firm HDFC has upgraded shares of Life to overweight and PB Fintech has also reiterated their bullish bias for SBI Life.
The insurance sector offers opportunities
The insurance sector has been cited by analysts at Morgan Stanley as the most preferred location, although sector stocks have so far outperformed bank stocks and even the benchmark BSE Sensex in 2022. SBI Life Insurance, HDFC Life Insurance, and ICICI General Insurance have been doing business on a year-to-date basis. Some analysts have blamed this low performance on the upcoming LIC IPO.
However, Morgan Stanley believes the sell-off has created a significant alpha opportunity. “We firmly view the fundamentals of Indian private life insurers and believe that the resilient VNB and EV growth seen in the last two years of the epidemic has been less appreciated by investors,” they added. The brokerage firm added that any argument about a significant impediment to private sector growth with LIC IPO incoming is in the case of speculation.
SBI Life Insurance Company: Top Stock Picks
Target Price: Rs. 1,450 per share
SBI Life is India’s largest private-sector life insurer and has been gaining market share over the years in both the private sector and the market as a whole. Morgan Stanley says SBI Life has the lowest cost structure in the entire industry, which is lower than LIC in India. “The assessment metrics – P / EV and P / VNB – a year ahead – look interesting,” they added. The stock is currently trading at Rs 1,105 per share, which translates into a rise of 31%.
HDFC Life Insurance Company: Upgraded overweight
Target Price: Rs
HDFC Life Stock has been upgraded from underweight to overweight by Morgan Stanley. “Historically, the main concern has been its premium valuation. The valuation looks interesting in the last two years due to the recent sharp correction and low performance, ”said analysts. “We have moderated our APE growth forecast for F22 and F23 from 18% / 20% to 16% / 18% due to the recent weakness in January and February as well as the growing macro risk,” they added. The stock has fallen 14% so far this year and is now trading at Rs 555 per share, suggesting a 21% uptrend.
PB Fintech: Upgraded
Target Price: Rs
“We have chosen PB Fintech’s business model because of its large and growing TAM, strong customer offer, influential market share and a clear path to profitability. However, the volatility of global fintech stocks and the limited rise in our target price keep our EW at bay, “said Morgan Stanley. Refers to.
