HDFC Life reported an ~8% y-o-y decline in APE growth in Q4 on a reported basis while adjusted for one off in the base period, it grew by 14% y-o-y. For FY24, APE growth was flat. Value of new business (VNB) fell by ~18% y-o-y/ 5% y-o-y in Q4FY24/ FY24. VNB margins declined by 320 bps y-o-y reported at 26.1% in Q4 and 26.3% for FY24. A slowdown in the agency channel and lower high ticket business was partly offset by a strong pick up in lower ticket size non-par business and the bancassurance channel.
The bancassurance channel’s APE growth was healthy at 20% y-o-y led by higher counter share from the parent bank and other partners. The agency channel remained laggard. ULIPs reported a strong growth of 132% y-o-y. The company reported 19% APE growth for policies below Rs 5 lakh in FY2024 and a 14% growth in number of policies. Tier II & III business is growing faster. Persistency trends were strong in most of the buckets.
Key positives.
Persistency trends remained strong across most buckets.
The Bancassurance channel supported APE growth (+20% y-o-y in Q4).
Key negatives.
VNB margins were impacted by an adverse product mix and negative operating leverage due to a large one-off in the base period.
Higher competition and lower high-ticket business led to a sharp decline in APE for agency channel
Management Commentary.
Management is targeting APE growth at the higher end of the industry growth expected (12–15%) in FY25 and given the competitive intensity it could settle for slightly lower margins, prioritising growth. The management is confident on increasing the counter share in the HDFC Bank channel to 70% (c.63%).
The company highlighted that there has been increased pricing pressure in the retail protection segment from online aggregators. IRDA and Indian accounting boards are still to provide guidance on implementing IFRS 17. It may take 24-26 months for the transition and has engaged external experts for the same.
HDFC Life Stock Valuation and Target Price.
HDFC Life trades at 2.4x/2.1x its FY2025E/ FY2026E EVPS. The company remains focused on maintaining a balanced product mix across businesses with leadership in new product launches. The management is confident of gradually catching up with the growth driven by lower ticket size segments; focus on tier II/ tier III geographies; higher counter share at HDFC Bank, other banca partnerships and investments in agency channels. Despite an adverse product mix change, margins have been managed well. Chasing growth over margins is a near-term phenomenon. We remain positive on medium to long-term prospects.
#stockstobuy,#stockmarket,#marketpost
0 Comments
Share Your View