Shares of HDFC Life Insurance Co Ltd plunged nearly 3 percent in Thursday's trade after the company reported a smaller-than-expected rise in fourth-quarter profit, as higher expenses more than offset the rise in income from premiums.

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The stock was trading 2.75 percent lower at Rs 517.00 per share on the NSE during morning hours. HDFC Life shares are down nearly 3 percent in the last six months, while on a year-to-date basis, it fell 9 percent. It touched a 52-week high of Rs 620.60 on January 6, 2023 and 52-week low of Rs 457.80 on March 16, 2023.

Global brokerage Morgan Stanley has a 'overweight' rating on the stock with a target price of Rs 700 per share. The brokerage says HDFC Bank's stake increase to 50 percent will remove a technical overhang. "HDFC Bank's stake increase should result in structural business gains," said Morgan Stanley, adding, "Valuation has de-rated significantly in recent years to attractive levels."

Jefferies has maintained a 'buy' rating on HDFC Life, with a target price of Rs 670 per share. The brokerage says it sees core premium growth of 15-20 percent with benefit from higher bancassurance.

"HDFC LIFE reported a good set of numbers, broadly in line with our estimates. HDFC Life reported a strong topline while VNB margin of 27.6 percent came in better than management’s earlier guidance of a flattish margin vs FY22 HDFCLIFE standalone VNB margin (27.4 percent)," said Emkay Global.

To reflect the Q4FY23 developments and the FY24 guidance, the brokerage has slightly tweaked their estimates and reiterated a 'buy' on the stock, with an unchanged Mar-24E target price of Rs 650 per share, implying a 2.9 times P/EV.

Meanwhile, brokerage firm CLSA has an 'underperform' rating on the stock, but raised the target price to Rs 560 per share. CLSA cited concerns over the potential challenges HDFC Life may face in the coming fiscal year, given the strong performance in the previous quarter was aided by pre-buying.

HDFC Life has posted a profit after tax of Rs 359 crore for the fourth quarter (Q4FY23) ended March 31, 2023, almost flat as compared to Rs 357 crore in the same quarter last year. On a sequential basis, net profit for the March quarter surged 14 percent from Rs 315 crore reported in the preceding October to December quarter.

The board has also proposed a final dividend of Rs 1.90 per share. "Recommended final dividend of Rs 1.90/‐ per equity share of face value Rs 10 each for the financial year 2022‐23, subject to the approval of the Shareholders at the ensuing Annual General Meeting (AGM)," the company said in a filing.

"We closed the year with a strong growth of 27 percent in individual WRP with a market share of 16.5 percent and 10.8 percent in the private and overall sector respectively, clocking expansion of 40 and 70 basis points respectively. We continue to grow faster than the private industry and be ranked amongst the top 3 life insurers across individual and group businesses. In terms of Individual WRP, we have outpaced the private industry over multiple timeframes including, in the past 3, 5 and 7 years, thereby consistently demonstrating growth leadership," said Vibha Padalkar, MD & CEO.

First Published:Apr 27, 2023 12:11 PM IST