HDFC Life Insurance
A long-term bet
Rating: Buy
(CMP: 688, Price Target: 850)
Company Description
Established in 2000, HDFC Life is a leading long-term life insurance solutions provider. The company offers a range of individual and group insurance solutions that meet various customer needs such as protection, pension, savings, investment, and health. HDFC Life continues to benefit from its increased presence across the country.
*Key Investment Arguments*
➡️We recommend Buy on HDFC Life Insurance (HLIC) with a price target of Rs. 850; we expect HLIC to deliver ~24% VNB margins over the next 2-3 years (on a normalised basis).
➡️For Q3FY2021, HLIC’s results were mixed, with operational results coming below estimates, but gain in market share with NBM margins improvement sequentially was encouraging indicating steady recovery from the impact of COVID-19.
➡️The insurance sector’s growth potential is huge in India; factors such as large
protection gap, retiral needs, expanding per capita income etc. are key long-
term growth drivers. We believe strong players such as HLIC are likely to gain
disproportionally from the opportunity.
➡️The stock is at a valuation of 4.9x/4.1x its FY2022E/FY2023E EVPS. Well-diversified product bouquet (no segment contributing more than 30% of the APE), strong brand image, and strong metrics make HLIC attractive.
