HDFC Life Q1 earnings preview: APE up 22% YoY to Rs 291 billion, VNB up 17%

HDFC Life Insurance Company is expected to report annualised premium equivalent (APE) of Rs 2,910 crore, up 22 per cent year-on-year, for the quarter ending June 30, 2024. However, APE could decline by 40 per cent quarter-on-quarter, according to an average estimate from three brokerages.

The value of new business (VNB) of the company is estimated at Rs 7,140 crore in Q1FY25, up 17 per cent over the same period last fiscal.

HDFC Life is scheduled to announce its results for the April-June quarter on Monday, July 15.

Key areas to monitor going forward include product level growth, particularly in protection products, and margin guidance from APE and VNB.

HDFC Life reported a consolidated net profit of Rs 4,167 crore in the June quarter of the last fiscal, while profit after tax (PAT) for the previous quarter (January-March) was Rs 4,116 crore.

Here are some brokerage recommendations:

Nuvama

Nuvama expects HDFC Life to report annualized premium equivalent (APE) of INR 291 billion for the quarter ending June 30, 2024, up 25% year-on-year but down 38% quarter-on-quarter. The company’s VNB for the reported quarter is estimated at INR 71 billion, up 17% year-on-year but down 42% quarter-on-quarter. Meanwhile, VNB margin is seen at 24.5%, down 168 basis points year-on-year and 161 basis points quarter-on-quarter.

In the firm’s view, investors will be focusing on product level growth, especially protection. The firm said FY25 and mid-term APE and VNB margin guidance will be the main focus for investors.

Kotak Equities

Kotak forecasts HDFC Life’s APE for the quarter to be Rs 2,784 crore, up 19.6% YoY and down 41.1% QoQ. VNB’s APE is forecast to be Rs 702 crore, up 15% YoY and down 43.1% QoQ. VNB’s Q1FY25 margin is forecast to be 25.2%, down 100 basis points YoY and 91 basis points QoQ.

Kotak said in a note that the 20% YoY APE growth rate in Q1FY25 is from a low base and the two-year APE CAGR is likely to be lower at 16%. Margin compression will occur due to increased volumes in low-margin ULIPs.

Yes Securities

Yes expects APE to grow 20% YoY to Rs 2,801 crore, down 41% quarter-on-quarter. New business value is estimated at Rs 729 crore, up 19% YoY and down 41% quarter-on-quarter. New business premiums (NBP) are expected to grow 13% YoY to Rs 6,608 crore, however this will be a 31% decline.

“We plan new business growth assumptions based on observed trends till May 2024, at which point HDFC Life saw NBP/APE decline of -23%/-35% in Jan & Feb 2024 (April & May 2024) compared to Jan & Feb 2024 (Jan & Feb 2024). We plan for VNB margin contraction of -10 bps q-o-q based on expected change in business mix,” Yes said in a brokerage note.

(Disclaimer: The recommendations, suggestions, views and opinions expressed by the experts are their own. They do not necessarily represent the views of The Economic Times)