Buy HDFC Life Insurance Company Ltd For Target Rs. 722 By Geojit Financial Services Ltd
Steady performance, promising outlook
HDFC Life Insurance Co Ltd (HDFC Life), a subsidiary of HDFC Bank, provides insurance services for life, health, property and automobiles.
* In Q3FY25, first-year premium and single premium increased by 10.8% YoY and 10.8% YoY, respectively, driven by 15.0% YoY increase in the number of policies sold. Renewal premium grew 11.7% YoY, supported by strong persistency ratios and a growing back book. As a result, gross premiums increased 11.3% YoY, reaching Rs. 17,275cr.
* For 9MFY25, annualised premium equivalent (APE) expanded 20.0% YoY to Rs. 10,293cr, attributed to a balanced product mix and increased contribution from tier 2 and tier 3 cities.
* Value of new business (VNB) surged 14.0% YoY to Rs. 2,586cr during 9MFY25, showcasing robust performance. However, new business margins contracted 140bps YoY to 25.1%, influenced by a greater share of unit-linked insurance plan (ULIP) products and the impact of revised surrender regulations.
* Despite operating expenses rising to 21.8% of net premium income in Q3FY25 from 20.3% in Q3FY24, HDFC Life registered a 13.7% rise in reported profit after tax, amounting to Rs. 415cr.
Outlook & Valuation
India’s financial literacy is improving but the country remains under-insured. This puts HDFC Life in a position to capitalise on emerging opportunities. Backed by anticipated GST cut on health insurance, regulatory support, diversified product portfolio, robust distribution network, strong brand presence and focus on product innovation, the company is poised to remain profitable. Its efforts to deepen its presence in tier 2 and tier 3 cities and maintain steady margins are expected to further strengthen its performance. Therefore, we maintain our BUY rating on the stock, based on 2.1x FY27E P/EV with a rolled forward price of Rs. 722.
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SEBI Registration Number: INH200000345
