HDFC Securities has assigned a buy rating on the shares of ICICI Prudential Life Insurance Company Ltd. The brokerage has set a target price of Rs. 686 for the stock, which it anticipates to grow 16.67 percent from its current market price of Rs. 588 in the next six months. ICICI Prudential Life Insurance Company Ltd has a market cap of Rs. 84,756 Cr and in the financial year 2021 the company's Assets Under Management (AUM) were Rs. 2,370.87 billion as of 30th September 2021.
Q2FY22 results of ICICI Prudential Life Insurance Company according to HDFC Securities
- Net premium income during the quarter grew by only 8.3% YoY as renewal premium declined by 4% YoY. Both Regular and Single premium had healthy growth of plus 30%. Shareholder's profit was up by 47% YoY on the back of slightly lower claim payments.
- New business premium (NBP) grew by 45% YoY and Annualized Premium Equivalent (APE) grew by 47.8% in H1FY22. Value of New Business (VNB) for H1FY22 was Rs.8.73 bn, a growth of 45.0% YoY, with VNB margin was 27.3% for H1FY22 as compared to 25.1% for FY21. For Q2FY22 VNB margins were down by 330 bps QoQ due to weak retail protection business growth.
- Total Assets Under Management (AUM) grew by 31% YoY. The Company had a debt-equity mix of 52%:48% at September 30, 2021. 97% of the debt investments are in AAA rated and government bonds. Persistency for 13th month was at 85.1%, up 300 bps YoY and down 30bps QoQ, while for 61st month it was at 51.6% down 10bps YoY and 620 bps QoQ. The Company's solvency ratio stood at 199.9% on September 30, 2021, well above the regulatory requirement of 150%.
Valuation & Recommendation of HDFC Securities
The company has reported decent Q2FY22 numbers, however, the VNB margins declined QoQ due to weak growth in the retail protection business. The company still had high claims paid due to delayed intimations of the second wave; IPRU has sufficient provisions. Management has reiterated that they are well on track with the objective of achieving double VNB by FY23 from FY19. Both October and November month business growth was encouraging. We have estimated IPRU to deliver CAGR of 23% for Value of New Business (VNB), 26% New Business Premium (NBP) and 12% for Embedded Value (EV) over FY21 to FY24E. The company is trading at 2.0x FY24 Embedded Value. Given the high growth environment, we believe that Indian life insurance companies will keep on getting higher multiples than in other economies
The company aspires to double the FY19 absolute Value of New Business (VNB) by FY23E with a 4P strategy of Premium growth, Protection business growth, Persistency improvement and Productivity enhancement while ensuring customer-centricity continues to remain the bedrock of everything. During Q2FY22 concall, the management has reiterated that they are well on track with that objective, which requires a compounded annual growth rate of 28% over the current and the next financial years. With the VNB growth currently at 45% H1FY22, the management believes that they are on track to achieve this aspiration
We believe that investors can BUY the stock in the Rs.580-587 band and add on dips to Rs.532 (1.8xFY24E P/EV) for a Base case fair value of Rs.652 (2.3xFY24E P/EV) and the Bull case the fair value of Rs.686 (2.4xFY24E P/EV) over next 6 months, said the brokerage in its research report.
The above stock has been picked from the brokerage report of HDFC Securities. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.