SBI Life is Motilal Oswal’s preferred pick in the life insurance space. Once Max Financial makes progress in structure simplification and sees revival in growth, its share price should witness sustained re-rating, said Emkay Global. ICICI Securities believes focusing more on value-for-money brand to cater to rural markets will pave the way for strong growth for Havells India in next decade. Colgate-Palmolive intends to acheive value growth through product premiumisation, but Nuvama Institutional Equities, for now, is neutral on the stock. Here’s what brokerages said on the four stocks in their latest reports:
SBI Life | Motilal Oswal | Buy| Target Rs 1,600
Motilal Oswal said SBI Life has witnessed strong traction in premium growth across all products segments (barring PAR) with agency and banca channel contributing to overall growth in FY22. It noted that trends in H1FY23 are strong with the company gaining further market share among private players. It expects this trend to continue on the back of wider product offerings combined with robust distribution capabilities.
“We estimate APE CAGR of 26 per cent over FY22-24, led by continued momentum in non-par savings and protection products. We also estimate VNB margins to improve to 31.4 per cent by FY24, driving 38 per cent CAGR in VNB over FY22-24E. We expect operating RoEV to improve to 23 per cent and estimate 21 per cent CAGR in EV over FY22-24E,” it said.
Calling SBI Life its preferred pick in the life insurance space, Motilal Oswal reiterated its BUY rating on the stock with a revised target of Rs 1,600, based on 2.5 times September 2024E EV.
Max Financial | Emkay Global | Buy | Target Rs 930
Emkay Global hosted Max Financial Services’ management in Mumbai on December 12, for meetings with DIIs to discuss the company’s business performance and growth trajectory as well as investor concerns. Amrit Singh – CFO (Max Life and MAXF) and Ankur Gupta from Investor Relations represented the company.
Post completion of acquisition of 5.17 per cent stake in Max Life from Mitsui Sumitomo (MSI) to Max Financial, the company is well on track to transfer an additional 7 per cent stake in Max Life to Axis Bank group entities, and thereafter proceed towards streamlining the holding company structure. The company highlighted that the growth in proprietary channels remains strong and channel growth should accelerate in Axis Bank, from January 2023. Owing to the slower YTDFY23 growth leading to a favourable product mix, FY23 margin are likely to be better than guided earlier (of logging lower than in FY22). The promoter remains committed to reducing his pledge and confirms his intent to hold on to his Max Financial ownership, Emkay said.
“Hurt by the double whammy of falling growth and deferral in structure simplification, including the delay and penalty from the regulatory end, Max Financial shares have materially underperformed the broader market and peers. Currently trading at FY24E P/EV of 1.6 times, Max shares are ascribing very little (implied 6 times FY25 VNB) structural value to such a strong franchise. Once the company makes progress in structure simplification and sees revival in growth, its share price should witness sustained re-rating, in our view. We reiterate our BUY rating on the stock, with our target of Rs 930 per share,” Emkay said.
Havells India | ICICI Securities | Buy | Target Rs 1,550
ICICI Securities noted that rural markets are just 5-6 per cent of Havells Consumer sales. With improving availability of electricity, India’s rural markets offer huge growth tailwinds to Havells, it said.
In order to tap the opportunity, the company commenced Rural Vistaar project four years ago. It has resulted in expansion of its rural coverage to 3,000 towns (44 per cent CAGR over FY19-FY22) with populations of 10-50,000 and availability of its products through 40,000 outlets (49 per cent CAGR over FY20-FY22).
“It also commenced the rollout of Utsav stores to towns with populations of 50 Utsav stores in FY22, the company plans to roll out 1,000 such stores in FY23. We believe it is also focusing more on its value-for-money brand REO to cater to the rural markets. We believe the benefits of these investments will pave the way for strong growth in next decade and will be DCF-accretive,” it said.
Colgate-Palmolive | Nuvama| Neutral | Target Rs 1,708
Colgate hosted its first analyst call post the joining of its new MD & CEO Prabha Narasimhan. Nuvama Institutional Equities, which attended the meet said the focus was on growing volumes first, then value. Among the key highlights, it noted that the company’s contribution from premium products is near double-digits and that value growth is intended to be achieved through product premiumisation.
Presently, the company is focusing on oral care and personal care. Organic and inorganic growth in Palmolive (non-oral) will be the strategy for expansion, Nuvama said. A new B2B platform, exclusive to Dentists known as ‘dentist first’, will go live in 2023, it added.
“Colgate will continue investing in core products while driving premiumisation and category expansion into personal care. We maintain ‘HOLD’ with an unchanged target of Rs 1,708,” Nuvama said.
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