HDFC Life share price surges over 9.5% on strong Q3 performance. Should you buy?
HDFC Life's shares surged 9.60% following Q3FY25 results, wherein the insurance company posted a 15% net profit increase. Analysts are positive, with CLSA and Jefferies maintaining buy ratings. HSBC expects margin improvements as credit protection sales increase and low-margin product growth slows.
HDFC Life share price surged 9.60% in early morning trade on Thursday, January 16 to a six-week high of ₹651 after the company's Q3FY25 numbers exceeded Street estimates. This performance also prompted analysts to retain their 'buy' recommendations on the stock.
On Wednesday, post-market hours, the company reported a 15% increase in its consolidated net profit for the December quarter, reaching ₹421.31 crore compared to ₹367.54 crore in the same period last year. The company's net premium income for Q3FY25 rose by 10%, totalling ₹16,832 crore, up from ₹15,273 crore in the corresponding quarter of the previous year.
The growth in profit after tax (PAT) was driven by a record 24% rise in HDFC Life's individual annual premium equivalent (APE). Its net premium income also saw a 13% quarter-on-quarter increase, rising from ₹16,614 crore in the July-September period.
The insurance giant's assets under management (AUM) grew by 18% year-over-year, reaching ₹3.3 lakh crore. Persistency ratios showed considerable improvement, with the 13th-month persistency ratio rising to 87% and the 61st-month ratio increasing to 61%.
The solvency ratio remained strong at 188%, comfortably exceeding the regulatory requirement of 150%. The company also emphasised its diversified product portfolio, with unit-linked products accounting for 37%, non-par savings for 35%, and protection products comprising 6% of individual APE.
Should you buy HDFC Life shares post Q3 results?
Following the company's better-than-expected performance in the December quarter, analysts have retained a positive outlook on the stock.
Global brokerage firm CLSA maintained an 'Outperform' call on HDFC Life but revised the target price lower to ₹690 per share. While the financial performance was healthy, CLSA flagged concerns over weak market sentiment and the absence of detailed communication on banca mix capping, with the focus limited to tightening processes.
Growth slowdown in Q3 and the chaotic regulatory landscape were also noted as challenges.
Another global brokerage firm, Jefferies, reiterated a 'Buy' rating with a target price of ₹750 per share. It noted that Q3 results exceeded expectations, with the value of new business (VNB) benefiting from a better product mix, despite softer premium growth. The brokerage emphasised that clarity on banca norms remains critical for improving growth visibility and triggering a re-rating of the stock.
Investec has also continued with its 'Buy' rating with a target price of ₹850 per share. The firm highlighted a significant positive surprise on margins, noting that concerns about banca partnerships were alleviated to some extent.
Likewise, HSBC retained its 'Buy' call with a target price of ₹750 per share. Sequential margin improvement in Q3 was higher than expected, driven by a focus on new customer acquisition and the expansion of distribution channels.
HSBC also pointed out that margins appear to have bottomed out as sales of credit protection improve and incremental changes in low-margin-linked products slow down. Additionally, margins are expected to improve in a rate-cut cycle due to their negative correlation with interest rates.
Macquarie maintained a 'Neutral' stance with a target price of ₹570 per share. The brokerage noted muted VNB growth, primarily driven by lower annual premium equivalent (APE) growth. VNB margins reverted to 26% levels, and APE growth moderation was described as broad-based.
Despite these challenges, Macquarie expects HDFC Life to achieve its 17% VNB guidance for the fiscal year.
Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.
Catch all the Business News , Market News , Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
- Top Gainers
- Top Losers
- 52 Week High