Buy HDFC Life Insurance Company Ltd For Target Rs.850 - ICICI Direct
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Steady growth; outlook on growth optimistic…
About the stock: HDFC Life is among the most dominant players in the Indian life insurance industry with a strong distribution network, parentage, operating metrics.
* Balanced product mix with focus on non-par and protection business
* Industry leading VNB margins of over 25%
Q2FY22 Results: Business traction healthy, elevated claims impact earnings.
* Gross premium grew at a healthy pace of 14% YoY to | 11632 crore
* VNB margins remained healthy at 26.4%, aided by a balanced product mix
* Claims remained elevated amid pandemic; provision buffer at | 204 crore
* Surplus improved from | 59 crore to | 178 crore QoQ
What should investors do? HDFC Life’s share price has grown by ~2x over the past four years.
* We retain our BUY rating on the stock
Target Price and Valuation: We value HDFC Life at 4.4x FY23E EV with TP of | 850
Key triggers for future price performance:
* Focus on credit protect & retirement product to aid business growth
* Strong distribution network remains core to maintain business momentum
* VNB margins to be industry leading at ~26%, led by balanced product mix
* Approval from IRDA, CCI for merger of Exide Life expected in Q4FY22
Alternate Stock Idea: Apart from HDFC Life, in our coverage we also like SBI Life
* SBI Life also comes with a strong parentage with strong distribution network and superior cost efficiencies
* BUY with a target price of | 1,250
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