HDFC Standard Life up 11% in three days; hits highest level since listing

The stock rallied 5% to Rs 429 on Monday, extending its 6% gain in past two trading days on BSE.

HDFC Standard Life Insurance has rallied 5% to Rs 429 on Monday, extending its 6% gain in past two trading days on BSE.

The stock is trading at its highest level since listing on November 17, 2017, up 48% against issue price of Rs 290 per share. HDFC Standard Life Insurance Company had raised Rs 87 billion through initial public offer (IPO).

The board of directors of HDFC Standard Life Insurance Company is scheduled to meet on Friday, January 19, 2018 to consider and approve the audited financial results (standalone) of the company for the quarter / nine months ending December 31, 2017.

India’s Life Insurance sector is poised for strong growth, driven in part by the financialisation of savings post demonetisation. A relatively under-penetrated market and rising awareness offer a multi-year growth opportunity for investors in India’s Insurance sector, according to analyst at HDFC Securities.

Insurance penetration (% of GDP) stands at 2.7% in India, compared to the global median penetration level of 3.5%. New Business Premium (NBP) has grown at a CAGR of 24.4% over FY15-17, with India being largely a savings (as opposed to protection) dominated market. We expect system NBP to grow at a CAGR of 20% over the next five years. Further, the Protection Gap remains, and offers huge growth potential. Companies with multi-channel distribution, and a focus on both bancassurance and digital, are expected to be the biggest beneficiaries, the brokerage firm said in recent report.

HDFC Securities have ‘buy’ rating on SBI Life Insurance Company, ICICI Prudential Life Insurance Company and Max Financials with potential upside between 13% and 16% from current levels.

Normalisation of the income tax rate (from 14.4% currently) is a key risk. An increase in the tax rate to 25% will result in target prices falling by 10-12%, as the brokerage firm expect gradual and moderate price hikes to partly compensate for the increase in tax rates.

COMPANY	LATEST	PREV CLOSE	GAIN(%)
HDFC STAND. LIFE	423.80	406.95	4.1
ICICI PRU LIFE	402.00	394.35	1.9
SBI LIFE INSURAN	702.85	699.60	0.5