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Why HDFC Standard Life Beat Peers Despite Mixed Analyst Ratings

HDFC Standard Life Insurance Co. Ltd. has outperformed its two-listed peers in private sector life insurance segment--SBI Life Insurance Co. Ltd. and ICICI Prudential Life Insurance Co. Ltd.--so far this year, despite getting mixed ratings by analysts.

Out of the 19 analysts tracking HDFC Standard Life, five have a ‘Buy’ rating on the stock, while eight have a ‘Hold’ and six a ‘Sell’ rating on the stock, according to Bloomberg data. SBI Life and ICICI Prudential Life continue to be analysts’ favourite bet despite underperformance. All analysts tracked by Bloomberg have a ‘Buy’ rating on the two stocks.

Why HDFC Standard Life Beat Peers Despite Mixed Analyst Ratings

What Works For HDFC Standard Life...

  • Strong bancassurance reach and network.
  • It has the highest value of new business margins of 24.2 percent as compared with SBI Life’s 19 percent and ICICI Prudential’s 17.5 percent, according to data compiled by BloombergQuint.
  • Net profit has grown at an annualised rate of 19.9 percent over the last five years (five-year compounded annual growth rate) as compared to SBI life’s 12.8 percent and ICICI Prudential’s 1.3 percent.

...What Doesn’t

  • Expensive valuations: HDFC Life trades at 5.4 times its one-year forward embedded value- the present value of future profits. That’s expensive than SBI Life’s 3 times and nearly the same as ICICI Prudential Life Insurance Co.’s 2.8 times, according to a Jefferies report.
  • HDFC Bank opened its branch access to the Tatas or Birlas, and that is feeding into slower growth HDFC Life, Nomura said in a note.
  • Strong positives looks priced in, according to a JP Morgan note.