HDFC Life Q1 Impact: Top Target Price Sees 19% Return, Brokerages Bullish
All but one of the 18 analysts tracking HDFC Life placed 'buy/accumulate' rating after the first quarter results.
HDFC Life Insurance Co. could remain an attractive proposition for investors, according to brokerages, following its June quarter result, which showed a diversified and agile business model.
All but one of the 18 analysts tracking HDFC Life placed a 'buy/accumulate' rating after the first quarter results.
Citi has the highest price target of Rs 975, implying a return potential of 19% over the previous close. Investec follows with a target of Rs 935, followed by Kotak Securities' Rs 925.
Analysts at Jefferies, Morgan Stanley, Goldman Sachs and CLSA are also bullish on the stock.
HDFC Life Q1 Recap
HDFC Life's April-June period net premium income rose 15% year-on-year to Rs 14,466 crore.
The Annualised Premium Equivalent (APE) grew by 12.5% to Rs 3,225 crore, compared to Rs 2,866 crore in the prior year, meeting NDTV Profit's estimate of Rs 3,200 crore.
The Value of New Business (VNB) advanced 12.7% to Rs 809 crore, from Rs 718 crore, meeting estimate of Rs 800 crore. VNB margins for the period came in at 25.1%, closely aligning with the forecast of 25%.
Overall, the company's net profit saw a 14% rise, reaching Rs 546 crore compared to Rs 478 crore in the corresponding period last year.
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Key Positives
Citi highlighted that margin increases were observed across various products. The company is also actively scaling up its distribution franchise. This business agility is seen as a key factor that warrants a premium valuation for the company, analysts said.
Emkay said HDFC Life will continue to trade at a premium to peers after the quarterly performance.
Nuvama forecasts the company will deliver APE and VNB growth of 12.9% and 15.2% in the current financial year.
Expensive Stock
Macquarie maintained an 'Underperform' rating on HDFC Life with a target price of Rs 720. Analysts said valuations are expensive, and a regulatory overhang with regards to bancassurance distribution remains a concern.
It noted that the first quarter result was in line, with VNB growth meeting expectations. However, Unit-Linked Insurance Plans (ULIP) and Participating (PAR) products are driving APE growth, while VNB margin remained flat year-over-year.
