Q4 FY24 Update:
No. of shares = 215 cr (As of 31-12-2023 as per published data)
Embedded value (12MFY24) = 47,468 Cr
VNB (12MFY24) = 3501 Cr
IEV + VNB (12MFY24)/share = 47,440/215 = 237.06
Valuation(27/Apr/24) = 587 / 237.06 = 2.47x
This looks low as compared to historic valuations, if my calculations are correct.
HDFC LIFE has delivered a profit after tax of Rs. 1,569 crore, implying a YoY increase of
15%, fuelled by 18% increase in profit emergence from back book. This also looks reasonable inspite of headwinds during FY24.
Management is targetting more business from HDFC Bank going forward, and also more growth from Tier 2/3 cities. Whether these aspirations can be translated into reality, need to be looked at after few quarters.
P/B is lower as compared to LIC and SBI LIfe, but Market Cap/Sales is higher. PAT growth over 5 years is less than SBI LIFE but better than ICICI Pru Life.
It is not undervalued based on these parameters, but other parameters relevant to Insurance business mentioned above could be more useful to decide valuations.
Invested and Long term story looks intact, but overhang on stock price may continue.
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