Citi has maintained its buy rating on HDFC Life, setting a target price of ₹820 despite a 200 bps year-on-year decline in value of new business (VNB) margins for 2QFY25. The decline is attributed to a shift in the product mix, with a higher focus on ULIPs and fewer annuities, and an additional 100 bps impact due to deferred non-par repricing. Citi estimates a net decline of 70 bps in VNB margins.
The margin decline is consistent with the first quarter of FY25, but the management remains optimistic, retaining its guidance for high-teens VNB growth. It plans to drive annual premium equivalents (APEs) through new policy growth while managing range-bound VNB margin contraction for FY2025E. The company expects margins in the second half of the year to be higher than in the first half, factoring in a 100 bps adjustment for first-half one-offs.
Citi highlights HDFC Life’s ongoing investment in agency channels and its efforts to penetrate smaller markets, reinforcing its constructive view on APE growth.
The current market price (CMP) of HDFC Life is ₹714.05.
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