Emkay Global Financial's research report on HDFC Life Insurance
HDFCLIFE reported broadly in-line numbers for H1FY25, with APE 3.6% above our estimate at Rs67.2bn however, VNB Margin at 24.6% missed our estimate of 25.1% resulting in largely in-line VNB at Rs16.6bn. Margin contraction was largely due to changes in the product mix and delay in re-pricing of Non-Par products. Management revised the APE growth guidance to 18-20%, with VNB growth being in the 15-17% range for FY25E. VNB Margins will remain rangebound; however, margins should improve in H2FY25 as the pricing environment for value-accretive products is likely to improve under the new surrender regulations. To mitigate the impact of the new surrender regulations, the company has implemented a combination of deferment in commissions and introduction of a clawback provision. To bake in the Q2 developments, we have increased our APE by 2-3% while reducing VNB Margin by 60-70bps, leading to broadly unchanged VNB for FY25-27E.
Outlook
We reiterate BUY with an unchanged Sep-25E TP of Rs825/sh, implying FY26E P/EV of 2.7x.
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