Buy HDFC Life Insurance Ltd For Target Rs. 800 - ICICI Direct
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Healthy 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, protection & annuity business
* Industry leading VNB margins of over 25%
Q3FY22 Results: Business traction healthy, lower investment income impacts PAT
* Gross premium grew at a healthy pace of 27% YoY to | 12255 crore
* VNB margins remained healthy at 26.5%, aided by a balanced product mix
* Continued moderation in Covid claims; provision buffer at | 105 crore
* PAT at | 274 crore; up 3% YoY, impacted by lower investment income
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 3.4x FY24E EV with TP of | 800.
Key triggers for future price performance:
* Moderation in Covid claims & buffer to aid VNB margin at ~26% ahead
* New product launch and select growth to aid business growth
* Strong distribution network remains core to maintain business momentum
* 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 | 1,400
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