EUR 120.00 For Business Accounts Only

MOSL: Morning India (30/April/19): 1. HDFC Life Insurance (Better premium mix drives improvement in return ratios); 2. Hero Motocorp; 3. Yes Bank; 4. Piramal Enterprises; 5. Biocon; 6. L&T Finance.; 7. Cholaman

MOrning India (30/April/19): 1. HDFC Life Insurance (Better premium mix drives improvement in return ratios); 2. Hero Motocorp; 3. Yes Bank; 4. Piramal Enterprises; 5. Biocon; 6. L&T Finance.; 7. Cholamandalam Inv & Fin; 8. Automobile 

Today’s top research idea

HDFC Life Insurance: Better premium mix drives improvement in return ratios

• HDFCLIFE delivered a stable performance, with shareholder profits growing 5% YoY to INR3.6b. In 4QFY19, un-weighted premium increased 15% YoY (APE growth of 9% YoY), led by ~27% YoY growth in single premium. For FY19, total premium/PAT grew 23.8%/13.1% YoY to INR289b/INR12.5b. For FY19, the share of the protection business increased to 16.7% of total APE (7% on an individual APE basis). Margins improved to 24.6% (v/s 23.2% for FY18), driving 20% YoY growth in VNB to INR15.4b.
• Renewal premium growth stood at 13% YoY (17% YoY in FY19), as the persistency ratios held largely stable.
• HDFCLIFE reported operating RoEV/RoE of 20.1%/24.6%, while EV increased to INR183b. We expect HDFCLIFE to deliver ~26% CAGR in new business APE over FY19-21, while the margins are likely to improve at a calibrated rate to 26% by FY21. We, thus, estimate a 27% CAGR in VNB, with RoEV sustaining at average ~20% over FY19-21. We value HDFCLIFE at INR475 per share (3.6x Mar'21E EV). Maintain Buy.

Piping hot news

Round 2 of PSB merger: PNB, Union Bank & BoI may get a call

• The government is soon likely to invite select lenders for discussion on a second round of merger in public sector banks, according to a finance ministry official. The lenders to be called may include Punjab National Bank (PNB), Union Bank of India and Bank of India (BoI).