Brokerages CLSA, Morgan Stanley and Credit Suisse give mixed calls on HDFC Life after muted Q4 result

Amid muted performance in quarter four earnings, brokerage firms predict a mixed call option for the HDFC Life Insurance shares. The insurance company reported a rise of over two per cent in Q4 profit on Monday on the back of a surge in the covid cases in the country. 

In its call option, CLSA maintains Outperform rating on HDFC Life. It says, the valuations of the company are not cheap, but it remains a steady compounder. It expects HDFC Life to deliver a 19 per cent VNB (Value of New Business) CAGR (Compound Annual Growth Rate) over FY21-23. 

Moreover, CLSA also expects FY23-21 APE (Annual Premium Equivalent) CAGR of 17 per cent and long-tern VNB Margin by 30 per cent. It sets a target price of Rs 780 per equity share. 

Whereas, Morgan Stanley has an Equal-weight rating on HDFC Life. The brokerage firm raises VNB & EV estimates by four and three per cent for FY22-23. The management cited cautious optimism given Covid-19 second wave concerns, Morgan Stanley reported. It sets a target of Rs 730 apiece. 

On the contrary, Credit Suisse has a Neutral call on HDFC Life with the target being lower than the current market price. It expects, the pace of VNB growth to slow to 15 per cent CAGR over FY21-23. The brokerage firm says, the overall growth of HDFC Life will be ahead of the industry due to a well-diversified book, moreover, the margin of the company may have also peaked. 

The company’s Value of New Business (VNB) has increased by 14 per cent a year-on-year basis to Rs 2,185 crore, with a New Business Margin of 26.1 per cent, HDFC Life said in its Q4 results report. 

The insurance company’s board has also recommended a final dividend of Rs 2.02 per equity share of the face value of Rs 10 each for FY21.  

The shares of HDFC Life plummeted over three and a half per cent during Tuesday’s trading session amid below-average Q4 results. The stock is currently trading at Rs 680 per share.