Analysts mixed on HDFC Life post Q1; APE strong, margin outlook cautious

HDFC Life posted a 14.2 per cent year-on-year (Y-o-Y) rise in net profit to ₹546 crore in Q1FY26, supported by a 19 per cent Y-o-Y jump in renewal premiums to ₹7,603 crore.

Brokerages on HDFC Life: HDFC Life Insurance reported a steady set of numbers for the June quarter of FY26 (Q1FY26), with analysts offering a mixed outlook, buoyed by robust premium growth but cautious on margin sustainability.  On the bourses, HDFC Life share price rose 2.24 per cent to an intraday high of ₹774 per share. By 9:40 AM, HDFC Life share price was trading 1.65 per cent higher at ₹769.50. In comparison, BSE Sensec was trading -0.10 per cent lower at 82,487.78 levels.

 

The insurer posted a 14.2 per cent year-on-year (Y-o-Y) rise in net profit to ₹546 crore in Q1FY26, supported by a 19 per cent Y-o-Y jump in renewal premiums to ₹7,603 crore. Net premium income rose 15.6 per cent Y-o-Y to ₹14,446 crore.

 

The key operating metric, Annualised Premium Equivalent (APE), grew 12.5 per cent Y-o-Y to ₹3,225 crore, reflecting balanced growth across both individual and group businesses. Value of New Business (VNB) rose 12.7 per cent Y-o-Y to ₹809 crore, while the VNB margin held steady at 25.1 per cent, compared to 25 per cent in Q1FY25.

 

Despite the headline growth, analysts were divided in their views on future profitability and valuations of HDFC Life.

 

Nuvama remained upbeat, noting a better-than-expected VNB performance. “HDFC Life’s Q1 APE grew 12.4 per cent Y-o-Y, slightly ahead of our estimates. Despite surrender value impact and lower fixed cost absorption, VNB margin expanded by 7 bps Y-o-Y,” it said. The brokerage reiterated a ‘Buy’ rating with a target price of ₹920, citing strong APE/VNB growth outlook and a healthy 16 per cent RoEV over FY26–28.  Track Stock Market LIVE Updates

 

Motilal Oswal, however, flagged a slight miss on VNB against expectations and trimmed its VNB margin estimates for FY26 and FY27 by 50 basis points each. “While APE growth was in line, VNB was 5 per cent below our forecast. Margins were impacted due to a shift towards lower-yielding products,” it noted. Still, the brokerage maintained a ‘Buy’ rating with a target price of ₹910, highlighting strong PAT growth and a robust back-book performance.

 

Emkay noted that HDFC Life’s performance was broadly in line with expectations, with largely in-line APE at ₹3,230 crore (versus estimated ₹3,240 crore). However, it flagged a marginal miss on VNB margin, which came in at 25.1 per cent - lower than its and consensus estimates of 25.5 per cent and 25.4 per cent, respectively. 

 

The brokerage highlighted continued momentum in ULIPs and a sharp shift in the Par–non-Par mix, with Par contribution rising to 16 per cent due to irrational pricing in the non-Par segment. 

 

Despite this shift in product mix, HDFC Life maintained Y-o-Y margin stability aided by product-level margin improvements. 

 

“The management remains confident of growth recovery in H2FY26 on the back of a favourable base effect, while we expect VNB margin to expand owing to the easing of fixed cost absorption as APE growth revives. We keep our estimates unchanged and retain BUY with unchanged Jun-26E TP of ₹850, implying FY27E P/EV of 2.5x,” Emkay analysts said, in a note.

 

Citi also maintained its ‘Buy’ rating while raising the target price to ₹975 from ₹935, citing a steady quarter and the insurer’s diversified, agile business model, according to reports. It pointed to margin improvements across product segments and scaling up of the distribution franchise.

 

Macquarie reportedly continued to stay cautious, maintaining an ‘Underperform’ rating with a target price of ₹720. It described the quarter as ‘in line’ and cited flat VNB margins, expensive valuations, and regulatory overhangs as key concerns.

 

HDFC Life’s management, however, remains confident. MD and CEO Vibha Padalkar said the company delivered healthy growth across topline, VNB, and margins, gained market share, and expanded its presence in Tier-II and Tier-III cities.

 

While most brokerages maintain a positive stance on the stock, concerns around margin sustainability and valuations may limit near-term upside.