Industry: Life Insurance

Recommendation: Accumulate

About the Company:

BSE Code 540777

NSE Code HDFCLIFE

52 Week High (Rs) 547

52 Week Low (Rs) 307

Market Cap (Rs Cr) 93914

Face Value 10

Industry Snapshot Investment Rationale:

Customers Open

Market Presence Domestic

Govt Regulations Medium

Msearch View Positive

Shareholding March 2018

Promoters 80.93%

Public 19.03%

Mr. Amitabh Chaudhry CEO

Mr. Deepak Parekh Director

Mr. Keki Mistry Director

Mr. Renu Karnad Director

Mr. Jamshed Irani Director

Key Ratios

Mcap/EV x 6.17

Mcap/AUM 88%

Embedded Value Rs Cr 15220

Price Chart

Mview

Research Team

022-61507123/142

Promoters/ Management

Cmp Rs 467

Jun-18

Key Data

HDFC STANDARD LIFE INSURANCE COMPANY LTD

Target Rs: 672

The information contained in this report is obtained from reliable sources and is directed at investors. In no circumstances should it be considered as an offer to sell/buy or, a solicitation of any offer to, buy or sell the securities or

commodities mentioned in this report. No representation is made that the transactions undertaken based on the information contained in this report will be profitable, or that they will not result in losses. Mehta Groups and/or its

representatives will not be liable for the recipients’ investment decision based on this report.

Incorporated in 2000, HDFC Standard Life Insurance Company Ltd (HDFC Life) is Mumbai based lifeinsurance provider in India. HDFCLife offers a wide range of individual and group insurance solutionsincluding Protection, Pension, Savings & Investment and Health, along with Children's and Women'sPlan. HDFCLife is a joint venture between HDFC and Standard Life Aberdeen plc. HDFC is a leadingfinancial service provider in India offering finance for housing, banking, life and general insurance,asset management, venture capital and education loans. Standard Life is an Edinburgh basedinvestment company offering wide range of financial services across the globe.

HDFC Brand Leverage: HDFCLife has a strong parentage and a trusted brand that enhances its appealto consumers with market share near 5.2%. The product mix and its strong distribution channel hashelped it to provide better service’s in the industry. HDFCLife sells policies through a multi-channelnetwork. This includes direct sales through own branches, Insurance agents, Partner Banks andthrough other financial institutions. HDFCLife has over 414 branches and 15,406 full-time employeeslocated across India. Company has over 58,147 individual agents.

Highest Share in the protection business: HDFCLife has its major focus on the protection businesswhich accounts for 25% of its business in FY18. Significant decline in mortality charges has alreadymade the protection business much more attractive apart from its better margins than savingsproducts. We believe Protection business growth to drive margin going forward. India’s sum assured-to-GDP, a key measure of insurance protection in an economy, is significantly lower than that of othercountries. This indicates that India is still underinsured and there is significant scope for growth. Profitmargins are also significantly higher in the protection business.

Strong new business margins to drive growth: HDFCLife has the highest Value of New Business (VNB)margins, driven by group business, protection business and channel partner. We expect that HDFCLifewill maintain growth momentum as there is limited competition in group business and has widerproduct mix than its peers. We have seen that VNB has growth at a CAGR of 26.56% over last 5 yearsand expect the same going forward. Hence HDFCLife is one of the most profitable life insurers basedon VNB margin. Besides maintaining healthy trajectory in premium growth the company has alsodiversified its business mix and strategically reduced its reliance on low margin ULIP business.

Most Diversified product mix: HDFCLife has most diversified product mix compared to its peers in theindustry. Its major focus is on the protection business. Participating segment contributes 28% of therevenue, Non Par contributes 14% and rest is from Ulips which accounts for 58% of the revenue. Thecompany has a proven track record in identifying and tapping niche customer segments throughinnovative product solutions that have continued to witness strong customer demand. Suchdiversified product mix will help deliver steady growth and profitability across equity market / interestrate cycles.

We believe Insurance space is the next rising sector, driven by structural factors such pick-up in theeconomy, increasing share of insurance products within financial assets, increasing working populationand growing urbanisation will be key to the growth of insurance sector. Considering optimal scale ofoperations, efficient use of distribution channels (bank support), healthy persistency ratios and highernew business mix from protection business drives future growth. On valuation perse it is trading 6xMCap/EV and trading in premium valuations to its listed peers while we expect this to sustain and thestock to deliver steady returns over the mediumterm to longterm. Investor looking for a high qualitybusiness with consistent earnings growth HDFCLIFE offers the best in class investment opportunity tobuy at the current levels.

Recommendation: Accumulate/Buy

Particulars FY17 FY18 FY19E FY20E PARTICULARS FY17 FY18

Policyholders a/c(Tansfer) 786 1002 1153 1383 Sharholder's Fund

Income from investments 230 280 254 330 Share capital 1998 2012

Other income 0 13 0 0 Reserves & Surplus 1796 2707

Total A 1017 1295 1407 1713 Credit/(Debit) FV Change a/c 32 30

Policyholders Fund

Non business expenses 77 13 46 61 Credit/(Debit) FV Change a/c 398 622

Bad debts 0 0 0 0 Policy Liabilities 32383 42319

Provisions -4 0 0 0 Provision for linked liabilities 43029 46565

Policyholders fund 35 157 129 107 Add: Fair Value change 7777 8033

Total B 108 169 175 168 Provision for linked liabilities 50806 54598

Funds for discontinued policies:

PBT 909 1127 1232 1545 1)Discontinued for nonpayment 2979 2576

Provision for tax 22 18 25 32 2)Others 15 11

PAT 887 1109 1206 1513 Funds for future appropriation 867 959

Total 91274 105835

EPS 4.44 5.51 6.00 7.52

Application of funds

Investments

1)Shareholders 3231.4 4070.33

2)Policyholders 34692 45347

c)Asset to cover Linked liabilities 53800 57185

d)Loans 48 19

Fixed Assets 353 341

Current Assets:

Cash and Bank balance 797 1108

Advances & other assets 2174 2410

Sub Total (A) 2972 3518

Current liabilities 3775 4603

Provisions 47 44

Sub Total (B) 3822 4646

Net Current Assets -850 -1128

TOTAL 91274 105835

Balance Sheet (Rs Cr)Profit & Loss Statement (Rs Cr)

CONSOLIDATED FINANCIAL TABLES

Technical Outlook

Recommendation: Accumulate/Buy

Profit & Loss Statement (Rs Cr) Balance Sheet (Rs Cr)

Disclaimer: The views expressed / recommendations made in this report are based on fundalmental as well as TechnicalAnalysis techniques and could be at variance with the company’s / group's views based on fundamental research. Thereport and information contained herein is strictly confidential and meant solely for the selected recipient and may not bealtered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media orreproduced in any form, without prior written consent. This report and information herein is solely for informational purposeand may not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities orother financial instruments. Nothing in this report constitutes investment, legal, accounting and tax advice or arepresentation that any investment or strategy is suitable or appropriate to your specific circumstances. The securitiesdiscussed and opinions expressed in this report may not be suitable for all investors, who must make their own investmentdecisions, based on their own investment objectives, financial positions and needs of specific recipient. This may not betaken in substitution for the exercise of independent judgment by any recipient. Each recipient of this document shouldmake such investigations as it deems necessary to arrive at an independent evaluation of an investment in the securities ofcompanies referred to in this document (including the merits and risks involved), and should consult its own advisors todetermine the merits and risks of such an investment. The investment discussed or views expressed may not be suitable forall investors. Certain transactions -including those involving futures, options another derivatives as well as non-investmentgrade securities - involve substantial risk and are not suitable for all investors. No representation or warranty, express orimplied, is made as to the accuracy, completeness or fairness of the information and opinions contained in this document.The Disclosures of Interest Statement incorporated in this document is provided solely to enhance the transparency andshould not be treated as endorsement of the views expressed in the report. This information is subject to change withoutany prior notice. The Company reserves the right to make modifications and alternations to this statement as may berequired from time to time without any prior approval. MEHTA EQUITIES LTD, its affiliates, their directors and the employeesmay from time to time, effect or have effected an own account transaction in, or deal as principal or agent in or for thesecurities mentioned in this document. They may perform or seek to perform investment banking or other services for, orsolicit investment banking or other business from, any company referred to in this report. Each of these entities functions asa separate, distinct and independent of each other. The recipient should take this into account before interpreting thedocument. This report has been prepared on the basis of information that is already available in publicly accessible media ordeveloped through analysis of MEHTA EQUITIES LTD. The views expressed are those of the analyst and the Company may ormay not subscribe to all the views expressed therein. This document is being supplied to you solely for your information andmay not be reproduced, redistributed or passed on, directly or indirectly, to any other person or published, copied, in wholeor in part, for any purpose. Neither this document nor any copy of it may be taken or transmitted into the United State (toU.S. Persons), Canada, or Japan or distributed, directly or indirectly, in the United States or Canada or distributed orredistributed in Japan or to any resident thereof. This report is not directed or intended for distribution to, or use by, anyperson or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where suchdistribution, publication, availability or use would be contrary to law, regulation or which would subject MEHTA EQUITIESLTD to any registration or licensing requirement within such jurisdiction. The securities described herein may or may not beeligible for sale in all jurisdictions or to certain category of investors. Persons in whose possession this document may comeare required to inform themselves of and to observe such restriction. Neither the Firm, not its directors, employees, agentsor representatives shall be liable for any damages whether direct or indirect, incidental, special or consequential includinglost revenue or lost profits that may arise from or in connection with the use of the information.

MEHTA EQUITIES LTDBSE: - Membership Clearing No. 122 - SEBI Regn. No. INB010683856, NSE: - Membership Clearing No. 13512- SEBI

Regn. No. INB231351231, NSE FO SEBI Regn. No. INF231351231, CIN No: U65990MH1994PLC078478MSEI: - Membership Clearing No. 51800 - SEBI Regn. No. INB261351234

SEBI registered RA Reg No INH000000552Mehta Equities Limited, 903, 9th Floor, Lodha Supremus, Dr.E.Moses Road, Worli Naka, Worli,

Mumbai 400 018, India

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