HDFC Life Insurance: Prabhudas Lilladher Initiates Coverage with a Buy Rating and Price Target of Rs 835

HDFC Life Insurance Company Sees Flat Q4FY26 APE Growth Due to Global Uncertainties

Prabhudas Lilladher's latest research report on HDFC Life Insurance Company reveals that the company's Q4FY26 Annual Premium Equivalent (APE) growth was flat year-over-year (YoY) due to softness in bancassurance volumes and subdued growth in Non-Participating Annual Premium (NPAR). While sustained momentum in retail protection post Goods and Services Tax (GST) rationalization continues to be a positive factor, near-term demand is likely to be impacted by global uncertainties.

Key Drivers: Flat APE Growth and Contracting VNB Margin

The APE growth was affected by softness in bancassurance volumes and subdued growth in NPAR. However, the company's retail protection business continues to show positive momentum, driven by GST rationalization. On the other hand, the VNB margin contracted to 24.0% in Q4FY26 due to higher fixed costs (~90 basis points) and a drag from GST exemption (~110 basis points). The VNB margin is expected to expand gradually to 24.7% in FY27 and 25.2% in FY28E, driven by an increase in the share of protection and annuity products and the neutralization of GST impact.

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Growth Outlook and Valuation

The stock has corrected significantly due to underperformance on growth. However, Prabhudas Lilladher expects a recovery in margin and growth outlook in FY27 and FY28E. The research firm has rolled-forward to FY28E with a slight change in multiple of 2.2x (vs. 2.4x earlier) and values HDFC Life Insurance Company using the appraisal value framework with a Target Price (TP) of INR 835. The firm retains a BUY rating for the stock.