Buy HDFC Life Insurance Company; target of Rs 660: Geojit

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Geojit's research report on HDFC Life Insurance Company

HDFC Life Insurance Co. Ltd, a joint venture between HDFC Ltd. and Standard Life Aberdeen, provides insurance services and was listed on BSE on 17th November 2017. The issuer offers protection for life, health, properties and automobile, amongst others. Gross premium income rose 34.8% YoY in Q2FY21 driven by renewal premiums (+20.8% YoY) and single premium (+65.5% YoY). Company sold more than 4.4 lac policies, recorded strong growth of ~6% YoY. PAT rose 5.6% YoY to Rs. 326cr. Also, new business margin (NBV) improved 20bps to 25.6% in Q2FY21 supported by balanced product mix and cost control initiatives. The company’s solvency ratio expanded to 203% from 192% in H1FY20. Company’s market share for Individual weighted received premium (WRP) expanded 230 bps to 17.5% for H1FY21.

Outlook

Strong product mix and APE (Annualized Premium Equivalent) growth in individual protection segment along with improvement in premiums through digital payments should help performance. Hence, we upgrade our rating to BUY with a revised target price of Rs. 660 based on 4.5x FY22E Embedded Value per share.

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