Motilal Oswal starts coverage on Canara HSBC Life with 'Buy'; check target

Canara HSBC Life is among India's top 10 life insurance companies and has a well-diversified product mix, MOFSL said

Domestic brokerage Motilal Oswal Financial Services (MOFSL) has initiated coverage on newly listed Canara HSBC Life Insurance with a ‘Buy’ rating, citing a multi-year compounding opportunity driven by an improving bancassurance engine, rising contribution from higher-quality HSBC-linked business, and disciplined expansion of its agency channel.

 

"With one of the most underpenetrated PSU-bank funnels and clear visibility on branch activation, product mix upgrades and operating leverage, we expect the company to deliver over 17 per cent operating RoEV going ahead despite near-term ITC and agency drag," the brokerage said in its note.

 

Over FY25–28, MOFSL expects Canara HSBC Life Insurance to deliver a compound annual growth rate (CAGR) of 20 per cent in annualised premium equivalent (APE) and 23 per cent in value of new business (VNB). The brokerage has set a one-year target price of ₹180, based on 1.7 times FY28 estimated P/EV. The target price implies an upside potential of 23 per cent from the January 12, 2026, closing price of ₹146 on the NSE.

 

In its bull-case scenario, Motilal Oswal sees the stock reaching ₹220 by FY28, implying an upside of about 51 per cent from Monday’s closing price.  ALSO READ | IFCI share price surges over 17% in two sessions; should you buy?

Here's why Motilal Oswal Financial Services is bullish on Canara HSBC Life Insurance:

According to analysts at MOFSL, Canara HSBC Life is among India's top 10 life insurance companies and has a well-diversified product mix. In the first half of FY26 (H1FY26), unit-linked insurance plans (ULIPs) dominated the product mix, with ULIP, non-par, par and protection products contributing 50 per cent, 34 per cent, 8 per cent and 8 per cent, respectively.

 

The company's business is largely driven by the bancassurance channel, with Canara Bank and HSBC accounting for 70 per cent and 15 per cent of total business, respectively, in H1FY26.

 

Over the past decade, Canara HSBC Life Insurance has outpaced both the overall industry and the private sector, posting a 22 per cent CAGR in annualised premium equivalent (APE). As a result, its market share has expanded by 90 bps in the overall industry and 110 basis points within the private segment over the period.

 

Analysts believe the industry is well-positioned to deliver strong growth traction, supported by increasing penetration, GST exemption boost, narrowing protection gap in the country, and expected favourable regulations such as risk-based solvency, composite license, etc. 

 

Within this industry framework, the brokerage said CANHSBC can continue gaining market share by increasing penetration among Canara Bank customers, expanding cross-selling in the HSBC channel, strengthening its agency network, and building ties with new-age distributors.

 

Canara HSBC has just 1.7 per cent penetration among Canara Bank’s 120 million customers, which contributed 72.5 per cent of the company’s FY25 individual APE and grew at a 21 per cent CAGR between FY22-25. However, its branch productivity remains low at ₹1.6 million compared with over ₹5 million for other private banks. With Canara Bank investing heavily in digital tools for customer segmentation, the brokerage said it has strong growth potential.  ALSO READ | Larsen & Toubro slips 3%, trades lower for fourth straight day; here's why 

HSBC, which contributed 13 per cent of FY25 individual APE and grew at a 19 per cent CAGR over FY22-25, provides access to high-quality customers, including NRIs, affluent segments, employer-employee groups, and a credit card base of 1 million. Analysts noted that HSBC’s expansion plans and retail focus can help the company to grow its premier and profitable customer base.

 

The brokerage expects the product mix to gradually shift to a 40:60 Linked/Non-Linked ratio in the next few years, driven by GST exemptions on protection products, higher credit protection attachment rates, and interest rate cuts boosting Non-Par demand.

 

Canara HSBC Life Insurance is projected to report a CAGR of 20 per cent in APE and 23 per cent in VNB over FY25-28E. VNB margins are likely to expand by 50 bps each year due to favourable product mix and scale benefits, partially offset by agency channel investments. Operating RoEV is expected to remain above 17 per cent, with solvency above 200 per cent in the foreseeable future.