Buy HDFC Life Insurance; target of Rs 750: Emkay Global Financial

Emkay Global Financial's research report on HDFC Life Insurance

HDFCLIFE reported broadly in-line results for Q1FY25, with APE at Rs28.6bn (+23% YoY), coming in 4% above our estimates and more than offsetting the slight margin miss at 25% (Emkay est.: 25.6%), leading to a ~2% beat in VNB at Rs7.18bn (Emkay: Rs7bn). The margin decline in Q1 was largely due to product-mix changes in favor of ULIP. The management is confident of doubling the VNB over the next 4 years, with the heavy lifting of VNB growth being done by APE growth—this will be backed by HDFC Bank and the Agency channel firing up and the margin largely holding up as the limited impact from surrender-value regulatory changes can be offset by various actions by the company; also, focus on riders and sum assured should improve margins for savings products. To factor in the Q1 developments, we increase our APE estimates by 2-3%, while slightly reducing VNB margin that leads to a broadly unchanged VNB estimate.

Outlook

We reiterate our BUY on the stock with revised Jun-25E TP of Rs750/sh (vs Mar-25E TP of Rs725 earlier), implying FY26E P/EV of 2.5x.

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