Neutral HDFC Life Insurance; target of Rs 700: Motilal Oswal

Motilal Oswal's research report on HDFC Life Insurance

HDFC Life Insurance (HDFCLIFE) in 3QFY24 reported lower-than-expected performance with total APE at INR31.9b (missed our estimates by 7.3%).  Total APE declined marginally by 2% YoY to INR31.9b as NonPAR/annuity/term products declined 35%/45%/16% YoY, offset by 74%/96% surge in ULIPs/group products. VNB margins, at 26.8%, fell 70bp below expectations (missing estimates by 9.6%). Nevertheless, EV grew 20% YoY to INR452b. 3QFY24 PAT at INR 3.6b was broadly in line with estimates and saw a 16% YoY growth. For 9MFY24, APE/VNB/PAT grew 5%/5%/16% to INR86b/22.6b/11.5b.

Outlook

We estimate HDFCLIFE to deliver ~15% VNB CAGR over FY23-26 and margin to improve to ~29.4% by FY26E. We retain our Neutral stance on the stock with a TP of INR700 (premised on 2.6x Sep’25E EV).