HDFC Life Q2 Results Review - Strong Growth In APE; VNB Margin 120bps Lower Than Estimates: Motilal Oswal

Motilal Oswal Report

HDFC Life Insurance Company Ltd. reported annual premium equivalent of Rs 38.6 billion (in line with our estimates) in Q2 FY25, reflecting growth of 27% YoY, driven by 106%/46% YoY growth in Non-Par/ULIP.

Value of new business grew 17% YoY to Rs 9.4 billion (4% miss on our estimates), resulting in a lower-than-expected VNB margin of 24.3% (25.5% estimate).

Embedded value grew 21% YoY to Rs 521 billion, while solvency was at 181% versus 194% in Q2 FY24. PAT at Rs 4.3 billion grew 15% YoY but was 3% lower than our estimates.

Management has guided for 18-20% APE growth and 15-17% VNB growth for FY25. Impact of ~100 bp is expected on VNB margins due to new surrender value regulations.

We have lowered our VNB margin assumptions based on Q2 FY25 performance and the expected impact of surrender value regulations. We now estimate HDFC Life to deliver ~18% VNB CAGR over FY24-FY27 and margin to be steady in the range of 25-26.5%.

Reiterate Buy with a target price of Rs 900 (premised on 2.8 times Sep’26E EV).

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