Broker’s call: HDFC Life Buy

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Target: ₹710

CMP: ₹589.95

HDFC Life Insurance Co Ltd (HDFC Life), a subsidiary of HDFC Bank, provides insurance services — life, health, property and automobile protection, among others.

In Q4FY24, HDFC Life reported a net premium growth of 5.5 per cent y-o-y to ₹20,488 crore. Decline in new business premium was offset by a growth in renewal premium. HDFC Life reported a value of new business (VNB) of ₹3,501 crore (-4.7 per cent y-o-y). Also, the VNB margin contracted 130 bps to 26.3 per cent owing to unfavourable product mix and jump in commission expenses. AUM, however, increased 22.4 per cent y-o-y to ₹2,92,220 crore.

The management is optimistic of achieving 15 per cent y-o-y growth in retail and total annualised premium equivalent (APE) in FY25. It expects to drive long-term growth by increasing bancassurance share in the channel mix and maintaining balanced product mix. In FY24, HDFC Life launched a range of US dollar denominated life and health insurance plans to cater to the NRI audience.

Increasing number of agents and expanding branch network auger well for its future performance. Thus, we upgrade our rating on the stock to Buy from Hold with a revised target price of ₹710 based on 2.25x FY26E embedded value (EV) per share.