SBI Life, Godrej Properties, Navin Fluorine, Birlasoft, AU SFB And More Q2 Results Review - HDFC Securities

HDFC Securities Institutional Equities

SBI Life Insurance Subdued growth; marginal impact on profitability

SBI Life’s H1 FY25 value of new business printed at Rs 24.2 billion (+2.5% YoY), as the VNB margin softened to 26.8% (-180 bps YoY) on the back of a higher share of ULIP in the overall annual premium equivalent mix at 69% (H1 FY24: 64%).

Based on the management commentary, we maintain our APE growth forecast (+14% YoY), driven by sustained growth in individual business, and a weak Q4 FY24 in the base. Our high conviction Buy is anchored on three powerful and sustainable moats:

1. exclusive access to SBI’s massive distribution network (branch penetration at ~2%);

2. scope for improvement in margin-accretive traditional mix; and

3. cost leadership (excl. renewal comm)/APE ratio among peers (H1 FY25: 37.1%, H1 FY24: 36.3%).

We expect SBI Life to deliver FY24-27E APE/VNB CAGR of 15%/14%; we maintain Buy with a target price of Rs 2020 (2.2 times Sep-26E embedded value).

Birlasoft - Weak show again, yet hope floats

Birlasoft Ltd. disappointed yet again following a weak show in Q1. The business looks in disarray (near-term), but the earnings potential remains. While the revenue deceleration has been caused more by the life-sciences vertical decline, the margin drop over the past two quarters has been across the verticals.

The low annuity profile of the business has led to steep margin erosion with the shift in the onsite mix and lower velocity of backfill for the offshore revenue pool.

Notwithstanding the near-term motions, Biralsoft’s portfolio can leverage the large ERP upgrade cycle, especially with greater thrust in mid-market by SAP.

The company’s BFSI vertical (23% of revenue) outperformance has offset the portfolio volatility (manufacturing) and weakness (life-sciences). H2 is strong in renewals, and the commentary about the pipeline suggests bookings will improve ahead.

We have lowered our EPS estimates primarily due to margin pressure and its trajectory. We maintain an Add rating on Biralsoft with a revised target price of Rs 635, based on 24 times Dec-26E EPS.

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