HDFC Life Insurance Company (HDFC Life) reported Q3FY23 results with 17% YoY growth in retail APE. All reported numbers are non-comparable YoY, due to merger with Exide Life. Non-Par segment remained the key driver, forming 38.2% of total APE now, as per 9MFY23; while ULIP moderated to only 17.7% of APE now. Retail Protection remained weak YoY, though picked up sequentially to 13% QoQ in Q3, while Group Protection remained strong with Credit Protect growing at 52% YoY. VNB margins were flat on 9M YoY basis, as improved product mix was offset by fixed cost absorption related to Exide merger. As a result, VNB growth stood at 21% YoY. Exide integration is progressing well with margin neutrality achieved already, three quarters ahead of target.
Analysts at IIFL Securities are forecasting 18%/18% VNB/EV CAGR over FY23-25. Their 12-month Target Price has now increased to Rs650 on faster margin recovery in Exide. Valuations at 2.8x FY24 estimated P/EV are at average 25% premium to SBI Life. Analysts at IIFL Securities have maintained their Add recommendation on the stock citing limited upside potential.
