HDFC Life insurance (HDFCLIFE) - 362

Key ratios: latest 2018

Total Debt/Equity (X) 0.00 (Should be lesser)

Return on Networth/Equity (%) 23.33 (Should be more)

Price/BV (X) 15.42 (Should be neutral and less)

1. Market Cap (Rs-Cr) 73,095.30

2. P/E = 58

3. Book Value (RS) 23.57

4. Div (%) 13.60%

5. INDUSTRY P/E = 46.59

6. Div Yield. (%) 0.38%

7. Face Value (RS) 10.00

8. Positive cash flow year on Year

 Leading private sector life insurers in India

 6.75 per cent share in new business in FY19 (up to September)

 Sold 1.05 million new policies in FY18

 414 branches and more than 11,200 partner branches

 Assets under management worth Rs 1,066 billion (US$ 16.54 billion) in

FY18
In-line performance; operating metrics remain stable

HDFCLIFE delivered a stable performance in 3QFY19, with shareholder profits growing 18.5% YoY to
INR2.45b (our estimate: INR2.5b). Total unweighted premium grew 27% YoY (11% YoY in APE terms),
led by ~64% growth in single premium. In 9MFY19, the share of protection business increased to
16.6% in total APE, while it stood at 28.1% in un-weighted new business premium. New business
margins stood at 24% (24.3% for 1HFY19), driving 25% YoY growth in VNB. 

Renewal premium growth stood at 18% YoY (22% YoY in 2QFY19), as 13th month individual
persistency declined marginally to 82% (from 83% in 1HFY19). The share of ULIPs in individual APE
stood stable at 59%, while the composition of non-par savings business increased sharply to 14%
(11% in 1HFY19), aided by sharp growth in annuity business (4x growth in 9MFY19). HDFCLIFE
continues witnessing significant potential in the annuity/protection business, and thus, expects a
further improvement in the product mix, which should support profitability. 

Opex moderated to 13.8% (14.1% over 1HFY19), while commission expenses stood at 380bp v/s
450bp in 1HFY19. This reflects higher growth in the single premium business, the share of which has
increased from 28% in 9MFY18 to ~36% in 9MFY19. Share of direct channel in individual APE stood
at 17% v/s 14% in FY18. 

Other highlights: (i) HDFCLIFE further increased the size of its agency channel to >97K (20K agents
added in 9MFY19). (ii) The bancassurance partner count increased sharply to 209 (170 partners in
2QFY19). (iii) Total AUM grew 13% YoY to INR1.18t with debt:equity mix of 62:38. (iv) Solvency ratio
stood largely stable at 191%. 

Valuations and view: In 9MFY19, HDFCLIFE reported operating RoEV and RoE of 19.7% and 23.4%,
respectively, while embedded value increased to INR174b (20% YoY, aided by a recovery in
economic variance on easing interest rates). We expect ~24% CAGR in new business APE over FY18-
21, while margins are likely to improve at a calibrated rate to 25.6% by FY21. We, thus, estimate 27%
CAGR in VNB over FY18-21, with RoEV sustaining at average ~20% over the same period. We value
HDFCLIFE at INR475 per share (4x Sep’20E EV). Maintain Buy.
Technical Chart On HDFC LIFE – Trading Near IPO price

 Technically its trading Near 52 weeks low, And also Near IPO price

 It’s also one of the top performing company in this sector among its peers

 Show Good reversal in Weekly chart near bottom

 India's Life Insurance Sector Biggest in World, to Grow by 15% Over Next 5 Years
P&L on growth every year

Share Holding Pattern

Growth opportunity of this sector