HDFC Life Insurance shares are in focus today. The stocks have rallied over 10% intra-day after delivering a 13.7% YoY jump in Q3 net profit. Although the company’s VNB Margin, a measure of the profitability of new businesses for life insurance companies, dipped slightly to 26.06% from 26.8%, the street has given a thumbs up to the stock. This is because sequentially the VNB margin improved from 24.3% in Q2.
Here is a quick look at how brokerages are interpreting the Q3 performance and future outlook-
HDFC Life: Nomura upgrades rating
International brokerage house Nomura has upgraded the rating to Buy based on the current valuation. The stock has declined over 16^ in the last 3 months. Interestingly Nomura had downgraded the stock to Neutral in the last quarter on concerns about high valuation and slowing growth.
HDFC Life: Jefferies gives thumbs up to better product mix
Jefferies also has a Buy call on HDFC Life with a target of Rs750/Share. According to them, the Q3 results were better than what the street was expecting. Though premium growth was soft, the brokerage pointed out that a better product mix helped the VNB margin. The VNB is a measure of profitability for new business in the insurance sector. According to them, “clarity on Banca norms will be key for visibility of growth and rerating.”
HDFC Life: HSBC says focus on new customers a positive
HSBC has rated HDFC Life a ‘Buy’ with a target of Rs750/share. According to them this is on the back of better-than-expected improvement in sequential margins and focus on new customer acquisition. They believe that deepening distribution is likely to help growth and margins have bottomed out.
HDFC Life: CLSA cuts target price
CLSA has given an Outperform rating on the stock but cut the target price to Rs 690/share. This is because the brokerage house believes that though the financial performance is healthy, the weak sentiment could persist. Moreover, CLSA voiced some concern about the chaotic regulatory landscape despite healthy financials.
HDFC Life: Macquarie maintains Neutral rating
Macquarie also maintained a Neutral rating with a target price of Rs 570. According to them, the muted VNB growth is primarily driven by lower APE growth but the VNB margins reverting to 26% levels is a positive. They expect HDFC Life to meet 17% VNB guidance.
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