Buy HDFC Life Insurance; target of Rs 750: Motilal Oswal

Motilal Oswal's research report on HDFC Life Insurance

HDFC Life Insurance (HDFCLIFE) in 1QFY25 reported lower-than-expected VNB margins at 25% (est. 26%), with absolute VNB increasing 18% YoY to INR7.2b (in line with estimate). Total APE grew 23% YoY to INR28.7b (4% higher than estimates) in 1QFY25 as ULIP/non-par grew 88%/37% YoY. EV grew 19% YoY to INR496b, while solvency was at 186% vs. 200% in 1QFY24. The company has received approval to raise INR20b via sub-debt, which will improve solvency. 1Q PAT at INR4.8b grew 15% YoY but was 8% below our estimate. We have raised our APE growth estimates but lowered our VNB margin assumptions based on 1Q performance and the guidance.

Outlook

We now estimate HDFCLIFE to deliver an ~18% VNB CAGR over FY24-26 and steady margin in the range of 25-26%. Maintain BUY with a TP of INR750 (premised on 2.5x Mar’26E EV).

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