Shares of private insurer HDFC Life Insurance Company Ltd. jumped 10 percent in the morning session on January 16, as the insurance player's results for the October-December period came ahead of expectations. Brokerages and market experts retained their optimism on the insurance player.
HDFC Life reported a 14 percent increase in net profit for Q3 FY25, reaching Rs 415 crore compared to Rs 365 crore in the year-ago period. The life insurer's net premium income grew by 10 percent year-on-year to Rs 16,771 crore from Rs 15,235 crore, according to its stock exchange filings.
HDFC Life exceeded market expectations on key metrics. Its Annualised Premium Equivalent (APE) rose 15.5 percent to Rs 3,686 crore, surpassing the anticipated Rs 3,626 crore, per a Moneycontrol poll of brokerages.
Similarly, the Value of New Business (VNB) grew 17.8 percent to Rs 1,009 crore, ahead of the forecasted Rs 908 crore. The VNB margin, a critical measure of profitability, improved sequentially to 27.4 percent.
At 9.40 am, HDFC Life shares were quoting Rs 651.95 apiece, up 9.7 percent on the NSE.
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HSBC maintained its 'buy' call with a target price of Rs 750, citing stronger-than-expected sequential margin improvement in Q3. The brokerage expects HDFC Life's focus on new customer acquisition and expanding distribution to support future growth.
HSBC believes margins have bottomed out, with slower incremental sales of low-margin linked products and improved credit protection sales contributing to better profitability. Additionally, the brokerage expects margins to improve further in a rate-cut cycle, given their negative correlation with interest rates.
Jefferies also reiterated its 'buy' rating and a Rs 750 target price, highlighting HDFC Life's better-than-expected Q3 results. Despite slower premium growth, the value of new business (VNB) was supported by a more favorable product mix. However, Jefferies notes limited clarity on upcoming banca norms, which could impact growth visibility and the company's potential for rerating.
Meanwhile, CLSA lowered its target price to Rs 690 per share, but kept its 'outperformance' intact on account of HDFC Life's healthy financial performance but weak investor sentiment.
The brokerage highlights a Q3 growth slowdown and points to the chaotic regulatory landscape as a challenge. CLSA notes there has been no specific communication on the capping of banca mix, with the company instead focusing on tightening processes.
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