Add HDFC Life Insurance Ltd For Target Rs. 772 - Yes Securities
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Result Highlights
* NBP – NBP was at Rs 65.6bn was better than our estimate of Rs 62.9bn and registered a growth of 29%, The growth was a contribution of strong of 24% in single premium and healthy growth of 39% in First year premium on yoy basis. For full year basis NBP grew by 16.6% y/y.
* APE – APE at Rs 28.8bn was higher than our estimate of Rs25.8bn. APE growth was at 36.5% yoy and 33.6% on sequential basis. Growth was driven by strong performance across all product classes.
* VNB & VNB Margin – Q4FY21 VNB at Rs 7.7bn was higher than our forecasts of Rs6.9bn, while VNB margin at 27% was ahead of our estimates of 26.7%. On a yoy basis VNB margins improved by 285bps and sequentially margins improved by 54bps. For FY21 VNB margin stood at 26.1% against 25.9% in FY20.
* Opex and commission ratios – Commission ratios saw a marginal increase by 54bps yoy whereas opex ratio improved by 23bps. For Full year FY21, opex ratio saw a sharp fall of 129% and commission ratios declined marginally by 7bps.
* EV –EV stands at Rs266bn, a growth of 29% on yoy basis.
* Dividend – Proposed a final dividend of Rs 2.02 per share
Our view:
HDFC Life has delivered strong performance yet again with most parameters being ahead of estimates. Going ahead, the company is focusing on term and annuity as key products for growth. Both these segments will be margin accretive. Channel diversification strategy is expected to continue. Furthermore, new bancassurance tie ups are likely to add to growth in FY22.
We have raised our estimates to factor in higher unwind rates, stronger margin performance and relatively stronger premium growth expectations. Our APE and VNB estimates for FY22E and FY23E are higher by 5% and 1.2% respectively. With introduction of FY24E estimates in our discounted VNB approach to valuations our fair value has increased to Rs772 (from Rs721 earlier). FY23E P/EV of 3.8x provides a limited upside for a great franchise. Retain ADD.
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