HDFC Life Insurance: Here is why brokerages believe this insurance stock can give up to 55% return post Q4 results

Amid better-than-expected March quarter results, several global investment banking firms see an upside of up to 55 per cent in HDFC Life Insurance. The brokerages believe, among all, the Value of New Business (VNB) margins of the company has improved during the quarter. 

HDFC Life Insurance on Tuesday reported a 12.4 per cent year-on-year growth in net profit at Rs 357.52 crore in the fourth quarter of the financial year as compared to Rs 317.94 crore for the year-ago period. 

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During January-March, total income stood at Rs 16,054.94 crore, as against Rs 19,191.32 crore in the same quarter of 2020-21, HDFC Life said in a regulatory filing. 

The stock on Wednesday surged over 1.5 per cent to Rs 558.45 per share on the BSE intraday as compared to 1 per cent fall in the S&P BSE Sensex at around 2:00 PM. 

Maintaining an Outperform stance on HDFC Life, Macquarie said that VNB growth of 22 per cent for FY22 is a good outcome, similarly, the company is targeting good double-digit growth in the individual protection business. 

The brokerage said, the management aims to maintain a solvency margin of 180 per cent and debt capital raise to boost the solvency margin. It sets a target of Rs 850 per share, with an upside of around 55 per cent from Tuesday’s closing price. 

Another global brokerage firm CLSA gives a Buy call on the stock with a target price of Rs 700 per share, which implies over 27 per cent upside. The brokerage expects a Return On Embedded Value of 18-19 per cent and a favorable risk-reward for HDFC Life. 

The company is guiding to maintain its VNB margin including Exide Life, the brokerage said, adding further that the company saw a tough quarter for APE (Annual Premium Equivalent) growth, partly due to its high base. 

Meanwhile, Morgan Stanley gives an Overweight call on HDFC Life and said the company’s VNB 12 per cent growth is ahead of our estimate, driven by a much higher VNB margin than expected.  

The management guided to continued margin expansion with a possibility of 30 per cent, said the brokerage firm and sets a target of Rs 675 per share with an upside of around 23 per cent.