financials - hdfc securities · pranav gupta [email protected] +91-22-6171-7337 kaushik...

Financials

1QFY19E Results Preview

6 Jul 2018

Darpin Shah [email protected] +91-22-6171-7328

Madhukar Ladha [email protected] +91-22-6171-7323

Pranav Gupta [email protected] +91-22-6171-7337

Kaushik Utpat [email protected] +91-22-6171-7334

2

FINANCIALS : 1QFY19E RESULTS PREVIEW

More of the same

Like previous quarters, ebb and flow in the BFSI space is expected to continue in 1QFY19. After forceful recognition in 4Q, the focus shifted to resolutions in NCLT cases. However, the pace of resolutions continues to disappoint and remains a key overhang for corporate lenders. Despite some pickup in overall CAPEX,

corporate growth is expected to remain sluggish while retail products are set to dominate. Given the upward trend in interest rates (G-Sec), RBI extended MTM dispensation granted to banks allowing them to spreads provisions over FY19. This move should provide some respire to large PSBs.

Given the uptick in CV sales and tighter regulations on

overloading, vehicle financiers are expected to have a solid quarter. With the shift to 90DPD complete for the industry, major blips in asset quality are unlikely. However, the precise impact of Ind-AS applicability remains a mystery. As competition intensifies in the housing finance industry, we expect growth to remain under check. However, rising COF should be compensated by higher yields as HFCs inevitably follow hikes in MCLR by banks.

Public sector banks (PSBs)

Post the bloodbath in 4Q, PSBs should see some moderation in stress

accretion. However, the uptick in yields throughout the quarter will

keep provisions elevated. Additionally, aging and sluggish resolutions

are expected to pile further pressure on profitability. We expect SBIN

to report a PBT level loss of the 3rd consecutive quarter primarily

driven by high provisions (assuming no usage of RBI dispensation for

MTM provisions) and some NIM compression. However growth is

expected to pick up. Despite the adverse yield movement (and

elevated provisions for MTM), BOB is expected to report a small

profit. However, the recovery in growth is expected to remain on

track and primarily driven by the domestic book.

Private sector banks

For yet another quarter, the divergent performance across private

banks is set to continue. The subdued show for corporate lenders will

continue as asset quality woes will weigh on earnings though growth

picks up. On the flip side, retail focussed banks are expected to report

stellar numbers with robust growth, steady NIMs and stable asset

quality.

NBFCs

We expect the disbursal momentum to sustain for vehicle finance

NBFC’s leading to robust AUM accretion. In the first quarter of the

90DPD era, we expect asset quality to remain under check given the

focus in collection efficiency. The upward movement in G-Sec yields

may put some pressure on NIMs, albeit marginally during the qtr.

SCUF is expected to deliver healthy AUM growth driven by strong

SME disbursals. However, earnings may remain under pressure as the

co may provide for an exposure to a group company under stress.

Utilization of the RBI dispensation on MSME loans will be keenly eyed

HFCs

While growth in the housing space has been encouraging (as per the

RBI data for Q1FY19), the top players are expected to gain market

share. NIMs for the entire industry are expected to compress as yield

movement has been unfavorable. We expect 15% and 11% growth for

LICHF and REPCO respectively. The progress of resolutions under

SARFAESI will be keenly eyed for REPCO and resolutions in developer

book for LICHF.

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SFBs

For the MFI focussed SFBs, we expect provisioning to normalize given

the pain throughout FY18. We expect robust AUM expansion for

EQUITAS and UJJIVAN. Gaining CASA traction, cost efficiency and book

diversification will be the key monitorables.

For AUSFB, the growth momentum Is set to continue as product

offerings widen and vintage of branches increases. Profitability is

expected to remain steady given stable asset quality.

Life Insurance

1Q for the life insurance companies is generally a slower quarter-

FY19TD YoY Ind. NBP/APE growth has just been 8%/1%. This is on the

back of a high base 1QFY18 growth was at 46% YoY. We expect IPRU

face APE decline of ~20% on higher base (1QFY18 growth was 75%).

MAXL to report APE growth of ~15% YoY while we expect SBILIFE to

report APE growth of ~10% YoY; Moderation for SBILIFE is as a result

of higher base observed in 1QFY18 of 53%.

View

We reiterate our faith in retail focussed private banks given the

rampant under-penetration and digital push. Even after accelerated

recognition throughout FY18, we believe corporate lenders will

remain under pressure as aging provisioning kicks in. Sluggishness in

NCLT resolutions is an additional overhang.

We prefer KMB, RBK, CUBK and DCBB in the retail space. Despite

regular pushback, we believe ICICIBC is best placed amongst the

corporate lenders given higher recognition, better performing subs

and higher delta incase NCLT resolutions play out.

Despite rich valuations and jump in interest rates, CIFC is our top

pick in the NBFC space largely owing to best in class metrics across

parameters.

Our rough calculations suggest that if the contingent liability

(towards SVL) for SHTF crystallizes, our FY20E ABV could drop by

~6%. Hence we are reducing our target multiple from 2.75x to 2.50x.

Similarly for SCUF, the company’s exposure to related parties (Rs

4bn) could create an additional liability and erode FY20E ABV by

~6%. Hence, we are downgrading our multiple from 2.50x to 2.25x.

While we are positive on the long term prospects of life insurers in

India, we expect FY19 to be challenging in terms of growth,

especially after two blockbuster years. For FY19E we expect Ind.

NBP growth to come in around 11-14% and Ind. APE growth to come

in at 8-10%. We expect the top 4 players namely SBILIFE, IPRU, HDFC

Life and MAX Life to continue to gain market share. At current levels

we believe MAXF adequately builds in risks and offers the best risk

reward ratio; accordingly it is our top pick.

4


1QFY19E: Rising G-Sec Cuts Profits

COMPANY 1QFY19E

OUTLOOK WHAT’S LIKELY KEY MONITORABLES

SBIN AVG

Core earnings to grow at ~11% YoY (down ~2% QoQ) with a marginal uptick in loan growth and NIM compression

Flattish non Interest Income (albeit down sequentially) and 12% rise in opex will lead to tepid PPOP growth (merely ~3%)

With elevated provisions (LLP and MTM), we expect SBIN to report PBT loss for the 3rd consecutive quarter

Slippages from the watchlist and relapse from restructured book

Progress on NCLT exposures and provisions on the same

Utilization of RBI’s relaxation for MTM provisions

Comments on growth

BOB AVG

GNPAs expected to be stable with normalization of slippages and sustained momentum in recoveries and upgrades. NCLT resolution of one large steel exposure is expected to further boost recoveries.

Mid-teen growth in domestic book largely driven by retail loans; overseas book growth to remain muted

Healthy NII growth (+23%) led by healthy loan growth and lower interest reversals

Treasury gains to further dip with sustained rise in yields.

Higher MTM, lower treasury gains and flattish LLP (YoY) will keep PAT subdued

Slippages from the watchlist and relapse from restructured book

Progress on NCLT exposures and provisions on the same

Utilization of RBI’s relaxation for MTM provisions

Comments on consolidation and change in guard

5


1QFY19E: Mixed Show For Private Banks

COMPANY 1QFY19E


KMB GOOD

Stable NIMs and robust loan growth (~24%) will lead to

core earnings growth of 20%

Non-interest income to dip QoQ owing to lower fee

income sequentially

Provisions to remain flat as asset quality is expected to be

stable

Profitability to remain intact (+21% YoY) given strong

growth and stable margins

Plan for the mandated reduction in promoter

stake

Progress on 811 and digital initiatives

Comments on CASA trends

Subsidiary performance (especially KMP)

ICICIBC AVG

NII to grow a mere 7% despite a 12% uptick in advances as

NIM pressure is expected to continue

Sharp sequential decline in non-interest income largely

due to stake sale in ICICI sec in 4QFY18.

Slippages to moderate post the accelerated recognition in

the previous quarter

Provisions will remain above normal levels owing to aging

of NPAs

Net earnings to remain subdued, down ~61/22% YoY/QoQ

Specific comments in relation to the CEO and

alleged misconduct

Movement in impaired assets and watchlist

Progress on resolutions

Commentary on growth and margins

AXSB AVG

We expect continued tepid core income growth of ~7/4%

YoY/QoQ

Loans expected to grow ~2% sequentially (+16% YoY)

Other income should also drop primarily due to lower

treasury gains

Elevated LLP (+61% YoY) will keep profitability capped.

PAT is expected to drop 82% YoY

Movements in the below investment grade book

and status of exposures

Succession plan for the outbound CEO

Commentary on loan growth and margins

6


1QFY19E : Mixed Show For Private Banks

COMPANY 1QFY19E


IIB GOOD

Core income growth of ~19% YoY will be supported by strong loan growth (+27% YoY) and stable NIMs

Stable fee income and lower treasury income will limit non interest income growth to merely 2% QoQ

With stable asset quality performance, provisions are expected to dip ~2% sequentially

PAT growth of ~22% YoY

Comments on integration of Bharat Financial

SA traction

Comments on growth (especially vehicle finance segment) and NIM

RBL GOOD

Core NII growth of ~38/5% YoY/QoQ to be driven by ~36% YoY jump in advances and stable NIMs

Other income to remain flat owing to lower treasury gains

Opex to remain higher (+38% YoY) as the bank continues to invest in technology

The growth trend in PAT is set to continue with a 30/3% YoY/QoQ growth for the quarter

The movement in loan mix

Details of the cards business and retail profitability

Progress towards vision 2020

FB AVG

~2% sequential growth In NII primarily driven by lower interest reversals and loan growth of 23% YoY

NIM is expected to remain stable QoQ

NPA provisions are expected to moderate (down ~28% QoQ) owing to accelerated stress recognition in 4Q. MTM related provisions are expected to remain elevated

PAT down ~13% YoY, albeit up ~27% sequentially

Update on the progress of new retail products i.e. CV, cards etc.

Asset quality: Movement in the Corp & MSME segment

NIM movement & efficiency ratios

7


1QFY19E : Mixed Show For Private Banks

COMPANY 1QFY19E


CUB GOOD

Despite loan growth of ~18% YoY NII growth will remain lower (~12% YoY) owing to come NIM pressure

Lower treasury gains will lead to flattish non interest income

Slight deterioration in C-I ratio largely due to higher staff costs (wage revision)

With lower stressed exposures, we expect provisions to dip YoY. However there may be a slight uptick sequentially as CUB is expected to further provide for O/S SRs

Net earnings should remain stable QoQ

Comments on the growth environment

Utilization of the MSME dispensation allowed by RBI

Movement in C-I ratio

Provisions on SRs

KVB AVG

Despite healthy growth (+4% QoQ), NII is expected to dip ~6% sequentially owing to a one off in 4QFY18

Other income should dip ~16/4% YoY/QoQ on account of lower treasury gains

PPOP expected to dip ~7% QoQ

We have factored elevated provisioning (+78 YoY) as accelerated NPA recognition continues

PAT to de-grow 45% YoY, albeit up ~62% QoQ

Asset quality movement with slippages from the watchlist / other stressed assets

Utilization of the MSME dispensation allowed by RBI.

An update on new product launches in retail and growth in granular businesses

DCBB GOOD

Core earnings growth (~16%) to be driven by 27%+ loan growth and superior NIMs.

Non interest income is expected to dip after a seasonal fee spike in 4Q and moderation in treasury profits

C-I ratio to rise to 62% (+300bps QoQ).

We have factored a in a ~4% QoQ jump in provision despite a calc PCR of 75.7%.

Comments on growth and margins

Specifics on reduction of C/I ratio

Asset quality trends in the LAP book given the accretion over FY18

Competition in the focus business (LAP)

8


1QFY19E : Healthy Growth For SFBs

COMPANY 1QFY19E


AUSFB GOOD

Robust core earnings growth (+55% YoY) primarily driven by

a 60% YoY surge in AUM.

Opex is expected to increase further (+80% YoY) due to

ramp up in the banking services

We expect a slight uptick (+3/1% YoY/QoQ) in provisioning

costs

PAT is expected to remain stable sequentially

Growth in advances and performance of new

products

Opex trajectory

Traction in CASA franchise

EQUITAS GOOD

Healthy NII growth of 22% led by strong AUM growth and

some margin compression

Lower Non interest income as base qtr included lumpy PSLC

income

Provisioning cost is expected to be lower YoY (stable QoQ)

On smaller base, PAT expected to jump 3.8x YoY and 69%

QoQ

Run down in MFI book, if any

Growth in Non-MFI book

Efficiency movement

PSLC Income

CASA traction

UJJIVAN GOOD

NII to increase by ~2% QoQ despite an expected NIM

compression

AUM expected to grow ~35/9% YoY/QoQ

Provisions to be lower post the pain taken throughout

FY18.

PAT is expected to Rs 728mn

Loan book growth; mix between MFI and Non-

MFI book

Sequential movement in opex and future

guidance

9


1QFY19E : Robust Quarter For VF NBFCs, HFCs may see NIM pressure

COMPANY 1QFY19E


SHTF GOOD

Healthy disbursals growth (YoY) is expected to drive AUM

growth of ~18% YoY.

NII growth of 17% with some NIM compression

Opex to gradually rise (added branches and employees

over last couple of qtrs)

We have conservatively factored higher provisions (+32%

YoY ) will lead to flattish PAT YoY (+3x QoQ on a smaller

base)

Comments on growth and NIM with rise in

interest rates

Comments on guarantees given on behalf of

SVL (Rs 8.7bn)

MMFS GOOD

Healthy and broad based YoY growth in disbursals

AUM growth to be in higher teens

NII growth is expected to be 31% YoY (-14% QoQ) with

NIM improvement

PAT to rise 4.4x YoY (-50% QoQ) with a drop in provisions

(19% YoY)

Comments on recoveries and demand in rural

India

Comments on growth

Performance of housing subsidiary

LICHF MUTED

NII to grow at 11% YoY with steady AUM growth (15%)

Spreads expected to be marginally lower on sequential

basis

PAT expected to grow 19% YoY with ~60% drop (albeit up

QoQ) in provisions.

Disbursement mix

Resolutions in the developer book

Comments on NIM and prepayment rate

10


1QFY19E : Robust Quarter For VF NBFCs, HFCs may see NIM pressure

COMPANY 1QFY19E


CIFC GOOD

VF disbursals expected to be healthy (YoY), while gradual

uptick in HE to continue

Core earnings growth of ~33% YoY, with ~24% AUM

growth and NIM improvement (albeit down QoQ)

Despite factoring in a steep rise in opex, PPOP is expected

to grow at a healthy ~27% YoY

We have conservatively factored higher provisions on

QoQ basis

Net earnings to grow ~44/2% YoY/QoQ

Comments on the HE (LAP) business: Disbursals,

AUM growth, margins and asset quality

Traction in the VF business

Improvement in operational efficiency

SCUF GOOD

Pick up in disbursals (growth expected to be in the range

of 18-20%)

AUM growth to reflect the disbursals growth with steady

repayments and higher SME proportion

We expect 14% YoY NII growth after factoring some NIM

compression

With 26% rise in provisions (on conservative basis), PAT

expected to be muted (+4% YoY; albeit up ~4.3x QoQ)

Comments on growth post GST

Utilisation of RBI’s dispensation on MSME loans

PCR movement

Comments on exposure to SVL and its

subsidiary (Rs 4bn)

REPCO MUTED

Core earnings to de-grow ~2% as growth (+11% YoY)

remains sluggish

Improvement in asset quality expected on the back of

resolutions through SARFAESI

Overall opex to dip ~5% sequentially as other opex

normalizes

Net earnings to slightly dip

Recoveries through SARFAESI and progress on

the residual stock

Growth trends and competition in the region

Comments on margins

11


1QFY19E : Lower Headline growth on High Base

COMPANY 1QFY19E


SBI Life NEUTRAL

Higher base (1QFY18 was +53% YoY) to drag overall

growth nos; APE grow to slow down to +8.3% YoY

Reported 1QFY19 VNB margin to be 16.0-16.5%

compared to 16.5% in FY18.

Share of protection to improve

ULIP is expected to be key driver of premium growth

Adj. VNB margins

Channel and product mix

Persistency trend

ICICI Pru Life MUTED

APE decline of 19.2% due to high base (1QFY18 was +75%

YoY) and volatile equity market

ULIP is expected to be key driver of premium growth

Share of protection to improve

Full year VNB margin is expected to come in flat ~16.5% ,

same as FY18

Protection mix improvement

Persistency trend

Channel and product mix

Max Life GOOD

APE to grow by ~15% YoY

Does not report VNB margins on a quarterly basis however

has guided for ~150 bps yearly improvement in margins

Growth in other channels

Protection Premium Growth

Persistency Trend

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Financial Summary

COMPANY NII (Rs bn) PPOP (Rs bn) APAT (Rs bn)

1QFY19E YoY (%) QoQ (%) 1QFY19E YoY (%) QoQ (%) 1QFY19E YoY (%) QoQ (%)

Public Sector Banks

SBIN 195.7 11.1% -2.0% 122.6 3.2% -22.8% (13.2) -165.8% -82.9%

BOB 41.7 22.6% 4.3% 28.0 5.6% 4.9% 2.1 4.5% -106.9%

Private Sector Banks

KMB 27.0 20.4% 4.8% 19.9 25.0% -1.2% 11.1 21.2% -1.6%

ICICIBC 59.7 6.8% -0.9% 57.3 10.6% -23.7% 8.0 -60.9% -21.5%

AXSB 49.2 6.6% 4.0% 38.7 -9.8% 5.4% 2.4 -81.9% -110.8%

IIB 21.1 18.7% 4.9% 18.0 13.1% 1.6% 10.2 21.8% 7.0%

RBK 5.2 38.3% 4.5% 3.9 24.5% 1.2% 1.8 29.5% 2.5%

FB 9.5 19.1% 2.2% 5.4 -3.0% -8.1% 1.8 -12.7% 26.6%

CUB 3.8 12.2% 4.4% 3.0 1.4% 2.3% 1.5 10.3% 1.7%

KVB 6.1 12.6% -5.7% 4.5 -0.7% -6.9% 0.8 -44.7% 61.8%

DCBB 2.7 15.9% 2.5% 1.3 -4.4% -7.9% 0.6 -10.8% -9.4%

Small Finance Bank

AU 2.8 55.1% -0.8% 1.5 23.4% -0.6% 0.8 32.2% -1.6%

Equitas 2.6 22.7% 6.9% 1.0 50.9% 55.3% 0.6 278.5% 69.0%

Ujjivan 2.7 98.4% 1.8% 1.3 188.4% -3.1% 0.7 NA 12.3%

NBFCs

MMFS 11.3 31.3% -13.5% 6.7 36.6% -19.1% 2.1 344.7% -50.4%

SHTF 15.2 -4.3% 2.0% 14.2 13.8% 2.2% 4.5 -0.6% 208.5%

LICHF 10.1 11.1% 1.0% 9.1 10.4% 4.8% 5.6 18.6% 3.4%

CIFC 9.2 32.6% 3.2% 5.3 27.2% 3.2% 3.0 43.9% 2.1%

SCUF 9.3 13.8% 14.4% 5.7 13.6% 16.0% 2.1 5.9% 336.6%

REPCO 1.1 19.3% -1.7% 1.0 16.5% -0.8% 0.5 21.8% -2.7%

Source: Banks, HDFC sec Inst Research

13


Financial Summary

COMPANY APE (Rs bn) VNB Margin (%) VNB (Rs bn)

1QFY19E YoY (%) QoQ (%) 1QFY19E YoY (bps) QoQ (bps) 1QFY19E YoY (%) QoQ (%)

Insurance

SBI Life 13.9 8.3 -48.3 16.3 NA NA 2.3 NA NA

ICICI Prudential 13.8 -19.2 -37.8 16.5 NA NA 2.3 NA NA

Max Financial 5.2 12.6 -61.5 NA NA NA NA NA NA

Source: Banks, HDFC sec Inst Research

14


Peer Valuation

Source: HDFC sec Inst Research, #Adjusted for subsidiaries

MCap (Rs bn)

CMP (Rs)

Rating TP

(Rs)

ABV (Rs) P/E (x) P/ABV (x) ROAE (%) ROAA (%)

FY18E FY19E FY20E FY18E FY19E FY20E FY18E FY19E FY20E FY18E FY19E FY20E FY18E FY19E FY20E

PSU Banks

SBIN # 2,289 256 BUY 328 93 137 175 -21.4 13.4 6.1 1.68 1.14 0.89 -3.3 4.8 9.8 -0.21 0.29 0.60

BOB 262 113 BUY 182 75 108 138 -12.3 15.0 7.4 1.51 1.05 0.82 -6.1 4.5 8.6 -0.34 0.27 0.50

PVT Banks

KMB# 2,601 1,365 BUY 1,371 175 207 238 52.0 39.5 30.8 6.37 5.28 4.48 13.2 13.8 14.9 1.72 1.82 1.87

ICICIBC# 1,746 272 BUY 377 105 126 150 17.4 11.5 7.9 1.73 1.34 1.01 7.3 9.5 9.8 0.81 1.00 1.17

AXSB 1,332 511 NEU 538 184 226 269 475.7 26.1 14.0 2.78 2.26 1.90 0.5 7.7 12.9 0.04 0.69 1.13

IIB 1,169 1,964 BUY 1,966 379 435 503 32.7 30.4 24.5 5.19 4.52 3.90 16.5 15.4 16.6 1.80 1.56 1.56

RBK 235 564 BUY 582 152 170 194 37.3 26.6 20.3 3.71 3.31 2.91 11.5 12.6 14.8 1.15 1.27 1.31

FB 162 82 NEU 102 54 60 68 18.4 14.7 10.8 1.52 1.37 1.21 8.3 8.7 11.0 0.69 0.73 0.85

CUB 124 187 BUY 231 55 66 77 21.0 18.0 15.4 3.36 2.83 2.43 15.3 15.4 15.4 1.57 1.60 1.57

KVB 72 99 BUY 156 61 70 78 20.8 14.5 8.0 1.64 1.41 1.27 6.1 7.8 13.6 0.54 0.70 1.14

DCBB 52 169 BUY 216 78 88 98 21.2 16.4 13.3 2.16 1.92 1.72 9.8 10.8 12.0 0.90 0.95 0.97

SFB

AU SFB 192 639 NEU 673 73 117 135 62.5 43.0 32.6 8.72 5.48 4.75 13.8 15.0 14.9 1.98 1.98 1.96

NBFCs

MMFS # 282 459 BUY 590 119 142 163 30.4 18.8 15.9 3.70 3.11 2.70 11.3 14.8 15.7 1.78 2.45 2.44

SHTF 261 1,152 BUY 1,679 460 556 672 16.7 11.2 9.2 2.50 2.07 1.72 13.1 17.3 18.3 1.93 2.48 2.60

LICHF 240 476 BUY 636 237 275 318 12.1 10.1 8.5 2.00 1.73 1.50 16.7 17.4 17.8 1.23 1.29 1.33

CIFC 234 1,494 BUY 1,767 284 354 443 24.0 18.6 15.3 5.26 4.22 3.37 20.6 22.0 22.2 2.77 2.88 2.93

SCUF 128 1,940 BUY 2,274 702 849 1,011 19.3 14.5 11.3 2.77 2.28 1.92 12.5 14.8 16.7 2.48 2.73 2.98

REPCO 36 575 BUY 683 192 232 273 17.5 14.4 12.5 2.99 2.48 2.10 16.7 17.3 17.0 2.17 2.30 2.25

15


Peer Valuation

Bloomberg Ticker IPRU MAXF SBILIFE

Rating BUY BUY BUY

Current market price Rs 367 420 665

Market Capitalisation Rs bn 527 112 665

Target price Rs 481 567 870

Upside/(Downside) % 31 35 31

Particulars IPRU FY18

IPRU FY19E

IPRU FY20E

MAXF FY18

MAXF FY19E

MAXF FY20E

SBILIFE FY18

SBILIFE FY19E

SBILIFE FY20E

Profitablity

VNB Margin % 16.5 17.0 17.3 20.2 20.4 20.6 16.3 16.5 16.7

Total RoEV % 23.4 17.6 18.0 19.0 20.0 20.0 16.7 19.4 19.4

Operating RoEV % 22.7 17.6 18.0 19.7 20.0 20.0 17.8 19.4 19.4

Non-operating RoEV % 0.7 0.0 0.0 -0.7 0.0 0.0 -1.1 0.0 0.0

RoE % 27.9 23.4 21.0 24.1 26.5 25.0 19.4 19.0 19.8

Valuation at CMP

P/EV x 2.8 2.5 2.2 2.2 1.9 1.6 3.5 2.9 2.5

P/EVOP x 14.3 15.9 13.8 12.4 10.8 9.3 22.5 17.9 15.2

Implied P/VNB x 26.4 20.8 15.7 13.2 10.0 6.9 34.1 25.9 19.4

Implied P/VIF x 4.5 3.9 3.4 3.2 2.8 2.4 5.7 5.0 4.3

P/B x 8.0 7.1 6.4 5.6 4.7 3.9 10.4 8.9 7.6

P/E x 32.4 32.3 32.1 27.2 20.4 18.5 57.8 50.5 41.4

P/AUM x 0.4 0.3 0.3 0.3 0.3 0.2 0.6 0.5 0.4

Valuation at TP

P/EV x 3.7 3.2 2.8 2.9 2.5 2.2 4.5 3.8 3.3

P/EVOP x 18.8 20.9 18.0 16.7 14.6 12.6 29.5 23.4 19.8

Implied P/VNB x 39.1 31.6 24.7 21.8 17.5 13.3 48.8 38.0 29.4

Implied P/VIF x 5.9 5.2 4.5 3.0 2.6 2.3 7.5 6.5 5.6

P/B x 10.5 9.3 8.4 7.5 6.3 5.3 13.6 11.7 9.9

P/E x 42.5 42.3 42.1 36.7 27.5 24.9 75.6 66.1 54.2

P/AUM x 0.5 0.4 0.4 0.2 0.2 0.1 0.7 0.6 0.5

16


Peer Valuation


IPRU FY19E

IPRU FY20E

MAXF FY18

MAXF FY19E

MAXF FY20E

SBILIFE FY18

SBILIFE FY19E

SBILIFE FY20E

Per Share data

EV Rs 131 148 169 194 225 262 191 226 267

EVOP Rs 26 23 27 34 39 45 30 37 44

VNB Rs 9 11 13 17 20 23 14 17 21

VIF Rs 82 93 107 131 151 173 116 134 155

Book Value Rs 46 51 57 76 90 106 64 75 88

Earnings Rs 11 11 11 15 21 23 12 13 16

AUM Rs 972 1,120 1,303 1,362 1,645 1,909 1,163 1,395 1,704

ANW Rs 49 55 63 90 106 126 75 92 111

17


Peer Valuation


IPRU FY19E

IPRU FY20E

MAXF FY18

MAXF FY19E

MAXF FY20E

SBILIFE FY18

SBILIFE FY19E

SBILIFE FY20E

Key parameters

APE Rs bn 78 89 105 32 37 43 85 102 123

VNB Rs bn 13 15 18 7 7 9 14 17 21

Total EVOP Rs bn 37 33 38 13 15 17 30 37 44

Operating EVOP Rs bn 37 33 38 13 15 17 30 37 44

Non- operating EVOP Rs bn 1 0 0 (0) 0 0 (2) 0 0

EV Rs bn 188 213 243 74 86 100 191.4 226.3 267.3

Net worth Rs bn 66 74 82 29 35 41 64 75 88

Net Profit Rs bn 16 16 16 6 8 9 12 13 16

AUM 1,395 1,607 1,870 522 631 732 1,163 1,395 1,704

Growth YOY

APE % 17.6 14.0 18.0 18.2 13.0 16.0 29.3 20.0 20.0

VNB % 93.1 17.4 20.1 31.5 14.1 16.9 34.1 21.8 21.1

Total EVOP % 60.3 (10.1) 15.6 15.9 15.0 15.9 2.2 26.0 18.1

Operating EVOP % 60.3 (10.1) 15.6 15.9 15.0 15.9 2.2 26.0 18.1

Non- operating EVOP % (80.8) (100.0) NM (127.5) (100.0) NM (114.0) (100.0) NM

EV % 16.1 13.3 14.1 13.0 15.9 16.3 15.5 18.2 18.2

Net worth % 7.2 12.4 11.1 15.8 19.1 18.1 16.6 17.1 17.8

Net Profit % (5.0) 0.5 0.4 (10.3) 33.4 10.6 20.5 14.4 21.9

AUM % 13.5 15.2 16.4 17.7 20.7 16.1 19.0 19.9 22.1

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Rating Definitions

BUY : Where the stock is expected to deliver more than 10% returns over the next 12 month period

NEUTRAL : Where the stock is expected to deliver (-) 10% to 10% returns over the next 12 month period

SELL : Where the stock is expected to deliver less than (-) 10% returns over the next 12 month period

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