The share price of HDFC Life Insurance Company has so far gained more than 3 per cent in the month of September. Last week, HDFC Life Insurance announced the acquisition of Exide Life Insurance Company for Rs 6,687 crore. HDFC Life is one of the largest companies in the life insurance industry of India. Experts are seeing a rise of about 20 percent in the share prices of HDFC Life Insurance Company since Monday’s closing. On Monday, the stock reached a high of 743.25 and then fell to Rs 728.80 per share. At least three brokerages and research companies have given buy advice on the stock.
ICICI Direct Research
Rating: Buy, Target: Rs 850, Upside: 15.6%
The domestic research company believes that with the acquisition of Exide Life, customer and distribution remains positive. The cost of acquisition of Rs 6687 crore, which is 2.5x EV, is not cheap. Overall, we can expect EVPS of 8 per cent to Rs 183 per share for FY23E, ICICI Direct Research said.
Emkay Global Financial Services
Rating: Buy, Target: Rs 870, Upside: 18.36%
The brokerage company has set a 12-month target of Rs 870 per share. Which shows an increase of 18.36 percent. It is worth noting that a valuable premium of Rs 4000 crore over EV means 3 per cent of HDFC Life’s current market cap.
Rating: Buy, Target: Rs 775, Upside: 5.4%
The valuation of Exide life in the deal is 2.5x of the current, which the company considers more, because Exide life has given its smaller size. The EV per share for HDFC Life is expected to grow by 5 per cent. The brokerage company has retained the buy rating for the shares.
Motilal Oswal Financial Services
Rating: Neutral, Target: Rs. 750, Upside: 2%
The transaction value of the Exide Life 2.5x EV seems expensive. This is high considering Exide life’s three-year premium and EV CAGR of 10% and 8% respectively. The company’s per share assessment of HDFC Life is expected to grow at 2.5%/2% per cent during FY22/FY23E on completion of the transaction.