HDFC Standard Life Gains After CLSA Rates Shares New Buy

Shares of HDFC Standard Life Insurance Ltd. rose after brokerage CLSA said it expected the firm to extend its share in the local market from its current 7 percent due to a“wide distribution network and innovative product suite.”

The brokerage expects a 24 percent growth in the compounded annual growth terms in the company's new premiums over the next three years. Margin expansion is likely to result in an 18 percent uptick in the insurer's present value of future profits plus adjusted net asset value, CLSA noted.

HDFC Life is among the country's most profitable life insurers and is a step ahead of its peers in terms of growth and profitability, the brokerage said.

Future growth is likely to be aided by the company's key alliances with 125 bancassurance partners, focus on its agency channel and ramp-up of online sales.

A key negative in company's operations can be an expected decline in the business from its bancassurance partnership with HDFC Bank Ltd.

Further key risks to the anticipated growth are are volatility in premiums and an increase in the corporate tax rate, CLSA said.

Going ahead, the brokerage expects the company to maintain an operating return on enterprise value of around 20 percent over the next three years. CLSA added that the stock “deserves” a premium valuation to its peers, considering its higher profitability in the market.

The stock gained as much as 3.6 percent and was set for highest levels since its listing on Nov. 17.

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