Buy HDFC Life Insurance Company; target of Rs 739: ICICI Securities

ICICI Securities is bullish on HDFC Life Insurance Company recommended buy rating on the stock with a target price of Rs 739 in its research report dated July 16, 2024.

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July 16, 2024 / 13:12 IST

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ICICI Securities research report on HDFC Life Insurance Company

HDFC Life (HDFCLI) reported 18% growth in VNB YoY despite 113bps reduction in VNB margin to 25.1% in Q1FY25. This, along with strong 39% growth in non-par, 31% growth in individual protection and 22% growth in number of policies underline HDFCLI’s execution efforts as it aims to clock 18–20% VNB CAGR. The higher surrender value regulations should have limited impact of ~100bps on VNB (helped by conservative zero-surrender assumption from year two, restructuring of distribution payouts and competitive pricing). Increasing counter share in HDFC Bank (from 56.5% in Q1FY24 to 66% in Q1FY25) and increasing product-level margin with riders and embedded protection remain strong growth levers. Maintain BUY.

Outlook

We factor in calculated VNB margin of 26.1%/26.5% with weighted APE growth of 18%/15% in FY25/26E. This results in an EV of INR 640bn with core RoEV of 16% in FY26E. We value the stock based on 2.5x FY26E EV per share to arrive at our TP of INR 739 (unchanged).

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