Motilal Oswal recommended Neutral rating on HDFC Life Insurance with a target price of Rs 625 in its research report dated October 19, 2020.
HDFC Life (HDFCLIFE) reported improvement in new business APE, led by Individual Protection/PAR and Group savings business while the trend in ULIPs remained weak in 2QFY21. VNB margins improved to 25.6% led by rise in retail Protection/Annuity business and cost control. Thus, Absolute VNB grew 22% YoY during 2QFY21. On the persistency front, better trends were witnessed in the PAR/Protection business, and thus, 13th/25th month persistency improved by 200bp/400bp. Overall, shareholders’ PAT grew ~6% YoY to INR3.3b during 2QFY21.
Overall, we expect HDFCLIFE to reflect 17% VNB growth over FY20-23E. By FY23E, we expect margins to improve to ~26.4% and operating RoEV to remain steady at ~18%. Maintain Neutral.