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HDFC Life Insurance Company (HDFC Life) delivered a strong performance in the December quarter of the current financial year (Q3FY25), exceeding market expectations with robust earnings growth.
The company reported a 13.7 per cent year-on-year (Y-o-Y) increase in net profit to Rs 414.9 crore in the quarter.
The value of new business (VNB) rose 8.6 per cent Y-o-Y to Rs 930 crore, compared to Rs 856 crore in the corresponding quarter of the previous year.
Reacting to the results, the stock of the life insurer rallied as much as 11.15 per cent to hit an intraday high of Rs 660.55 apiece before settling 7.92 per cent higher at Rs 641.30.
Although the VNB margin, a key profitability metric, dipped slightly to 26.06 per cent from 26.8 per cent a year ago, it showed improvement from 24.3 per cent in the second quarter, bolstered by product repricing.
New business premiums grew 10.8 per cent Y-o-Y to Rs 7,899 crore, reflecting strong demand, compared to Rs 7,130 crore in the same period last year.
Additionally, the annualised premium equivalent (APE) increased 11.8 per cent to Rs 3,569 crore.
Most foreign and domestic brokerages remained optimistic about HDFC Life s growth outlook.
Nomura, which had previously downgraded the stock to neutral in Q2FY25 due to concerns about surrender value impact, slowing growth, and higher valuations, has now upgraded its rating to 'buy'.
Over the past three months, the stock has declined 17 per cent, underperforming the Nifty by 7 per cent.
However, Nomura believes the current valuation at 2 times one-year forward price to embedded value, or P/EV adequately reflects these negatives.
Maintaining a target price of Rs 735, Nomura anticipates annualised growth rates of approximately 17 per cent in APE and 13 per cent in VNB over FY24-FY27F (forecast for the period), alongside a VNB margin of about 25 per cent and an average return on operating EV of about 17 per cent.
HSBC has reiterated its buy rating with a target price of Rs 750, highlighting higher-than-expected sequential margin improvements in Q3FY25, focus on new customer acquisition, and expanded distribution as key growth drivers.
Similarly, Bernstein maintained its outperform rating, with a target of Rs 810.
Nuvama has also kept its buy recommendation, raising the target price to Rs 850 from Rs 830.
The brokerage noted a robust 24.1 per cent Y-o-Y growth in group business, which contributed to a total Q3FY25 APE growth of 13.4 per cent Y-o-Y despite a 6 per cent sequential decline.
The brokerage attributed the margin expansion to the repricing of non-participating products and effective pass-through of increased surrender values to policyholders and distributors.
Those at Emkay Research are positive on HDFC Life given its strong performance during the first nine months of FY25, noting that the company s APE of Rs 10,290 crore exceeded their estimates by 1.6 per cent, while the VNB margin of 25.1 per cent surpassed their projection of 24.5 per cent.
This led to a 4.2 per cent beat in VNB, which stood at Rs 2,590 crore.
Despite the challenges posed by the implementation of new surrender regulations, the VNB margin for Q3FY25 came in at 26.1 per cent, outperforming the expected 24.2 per cent.
This was attributed to improved product-level margins, driven by better persistency and an increased attachment rate of protection products.
To mitigate the impact of the new surrender regulations, the management revised the commission structure by introducing a clawback provision, deferring commissions, or reducing them.
With favourable valuations, Emkay reiterated its buy recommendation, maintaining a target price of Rs 775, which implies an FY26 estimated P/EV multiple of 2.6 times.
According to reports, Jefferies maintained buy, with a target price of Rs 750 while Macquarie maintained neutral , with a target price of Rs 570.
Mirroring other brokerages, Antique Stock Broking also maintained its buy rating, with a target price of Rs 810.
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