Buy HDFC Standard Life Insurance; target of Rs 691: Emkay Global Financial
Emkay Global Financial is bullish on HDFC Standard Life Insurance has recommended buy rating on the stock with a target price of Rs 691 in its research report dated October 19, 2020.
October 20, 2020 / 04:54 PM IST
Emkay Global Financial's report on HDFC Standard Life Insurance
VNB margins surged 80bps qoq to 25.7% (+140bps qoq) in Q2FY21 (25.1% for H1FY21) due to a change in product mix and active role of distribution mix. Absolute VNB grew by ~22% yoy after a ~42.9% yoy fall in the last quarter amid Covid-19-related lockdowns. HDFC Life has utilized its distribution mix in the most effective manner. In spite of a steep rise in the share of bancassurance channel to ~60% of distribution mix (vs. ~50% in FY20), the share of ULIPs stood at ~23%, whereas savings products grew to ~66% (vs. ~60% in FY20). Demand for term plans may rise as demand for credit protect policies normalizes. The firm’s balanced product mix provides a cushion against any business cyclicality while, at the same time, taking advantage of the underpenetrated protection market. We expect margins to improve gradually with the rising share of protection plans and increasing penetration in geographies.
We maintain our estimates and expect VNB to grow at a 13.4% CAGR to Rs28.3bn over FY20-23E, with a ~19% CAGR (due to a low base) in EV to Rs0.35tn by FY23E. We retain Buy/OW in EAP, with a TP of Rs691, corresponding to ~4x P/FY23E EV.
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