Buy HDFC Life Insurance Company; target of Rs 710: Geojit Financial Services

Geojit Financial Services research report on HDFC Life Insurance Company

HDFC Life Insurance Co Ltd (HDFC Life), a subsidiary of HDFC Bank, provides insurance services — life, health, property and automobile protection, among others. In Q4FY24, HDFC Life reported a net premium growth of 5.5% YoY to Rs. 20,488cr. Decline in new business premium was offset by a growth in renewal premium. HDFC Life reported a value of new business (VNB) of Rs. 3,501cr (-4.7% YoY). Also, the VNB margin contracted 130bps to 26.3% owing to unfavourable product mix and jump in commission expenses. AUM, however, increased 22.4% YoY to Rs. 2,92,220cr. The management is optimistic of achieving 15% YoY growth in retail and total annualised premium equivalent (APE) in FY25. It expects to drive long-term growth by increasing bancassurance share in the channel mix and maintaining balanced product mix. Increasing number of agents and expanding branch network auger well for its future performance.

Outlook

Thus, we upgrade our rating on the stock to BUY from HOLD with a revised target price of Rs. 710 based on 2.25x FY26E embedded value (EV) per share.