SBI Life Insurance delivered a strong and sustainable performance in the December quarter, reinforcing its position among preferred insurance plays, according to a research note from Morgan Stanley. The brokerage has raised its price target on the stock to Rs 2,550 from Rs 2,510, maintaining an Overweight rating and flagging meaningful upside potential.
Morgan Stanley said SBI Life continues to demonstrate an ability to deliver consistent value of new business (VNB) growth, supported by improving margins and a favourable product mix.
The revised target of Rs 2,550 implies around 24% upside, valuing the stock at 17x FY28 embedded value and VNB, which Morgan Stanley sees as conservative given SBI Life’s growth and profitability profile.
Margin Beat Offsets GST Headwinds
The VNB margin beat in Q3 was driven by stronger protection margins and better overall product profitability, aided by operating leverage and higher rider attachment. This more than offset the negative impact from GST-related changes, which management estimated at around 150 basis points.
The insurer expects the GST drag to reduce sharply by the fourth quarter, to about 30-40 basis points, helping margins stabilise going forward.
Moderation in Growth, But Not the Story’s End
Morgan Stanley expects some moderation in annualised premium equivalent (APE) growth in the March quarter, building in 10% growth for Q4, as the company laps a strong base. For FY26, the brokerage forecasts 14.5% APE growth, marginally above management’s guidance range of 13–14%, with a positive bias.
Importantly, analysts see scope for upside surprises on both APE growth and VNB margin, as SBI Life’s protection-led strategy gains further traction.
Strong Medium-Term Outlook
The brokerage has pencilled in a 28% VNB margin for FY26, at the upper end of management guidance, and expects a 1 percentage point margin expansion in each of FY27 and FY28. VNB is forecast to grow at a 17% CAGR over FY26–FY28, with upside risks.
Morgan Stanley highlighted SBI Life’s relatively strong internal risk levers, sector-leading return on embedded value (ROEV), and improving positioning on key investor concerns such as commission payouts.
While investors are questioning whether the best quarter is now behind the stock, Morgan Stanley disagrees. It believes SBI Life’s risk-reward remains compelling from a medium- to long-term perspective, making it the brokerage’s second-most preferred stock in its non-bank financials coverage.
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