HDFC Life Insurance Share Price Target: Emkay Retains ‘BUY’ As Q1FY26 Results Show Steady Growth

 Emkay Global has maintained its ‘BUY’ rating on HDFC Life Insurance, keeping the target price (TP) unchanged at Rs 850, citing stable Q1FY26 performance and expected margin improvement in the second half of the fiscal. The brokerage sees potential upside in the insurer’s valuation, pegging it at 2.5x FY27E Price-to-EV and an implied P/VNB of 22x.

\“HDFC Life’s Q1FY26 performance was on expected lines,” Emkay said in its report, highlighting that while Value of New Business (VNB) margins dipped slightly to 25.1%, the company delivered steady year-on-year profitability and growth in key metrics.

Q1FY26 Financials: Growth With Margin Stability
For the quarter ending June 2025, Annualized Premium Equivalent (APE) came in at ₹32.3 billion, showing a 12.5% YoY growth, nearly matching Emkay’s estimate of ₹32.4 billion. Meanwhile, the VNB stood at ₹8.1 billion, up 12.7% YoY, but 2.4% below Emkay’s expectations due to a marginally lower margin.

The VNB margin of 25.1% fell short of Emkay’s and market consensus of around 25.4–25.5%, driven primarily by a shift in product mix toward the participating (Par) segment and fixed cost absorption challenges.

Net profit (PAT) grew 14.4% YoY to ₹5.5 billion, aligning with analyst estimates. The insurer’s Embedded Value (EV) rose to ₹583.6 billion, a 17.6% increase YoY, and slightly above Emkay’s expectation of ₹580.2 billion.

The total Assets Under Management (AUM) reached ₹3,559 billion, recording a 14.7% YoY rise, marginally exceeding estimates.

Product Mix Shift: Par Segment Gains Share
The quarter saw a notable shift in the product mix, with the Par segment’s contribution increasing sharply to 32%—a rise of ~16 percentage points YoY. This was attributed to “irrational pricing in the non-Par segment,” Emkay noted. While such a shift typically exerts pressure on margins, HDFC Life managed to maintain stability thanks to strong margin improvement across products, including longer-tenure policies and higher sum assured sales.

“Despite the drastic shift in product mix, the company reported stable VNB margin, driven by improvement in the margin profile across products,” Emkay said, adding that the margin differential across product segments has narrowed, supporting overall profitability.

Persistency Trends Mixed, But Long-Term Improves
In terms of policyholder retention, the company saw a 2-percentage point decline in 13-month persistency, a metric used to gauge customer stickiness in the early policy period. However, the 61-month persistency rate improved significantly, indicating stronger long-term customer retention.

Margin Outlook: Better Days Ahead
Looking forward, Emkay expects margin expansion in upcoming quarters as APE growth revives, helping ease the burden of fixed costs. The impact of new surrender regulations, which trimmed margins by 30 basis points YoY in Q1, is also expected to normalize.

“Going forward, with APE growth reviving, the fixed cost absorption should ease while the impact of new surrender regulations on the VNB margin should normalize, which is likely to drive margin expansion,” Emkay said.

Why Emkay Is Staying Bullish

“Led by the company’s credible management, strong execution, brand and distribution strength, and ability to enhance product-level margins, we believe HDFC Life will continue to trade at a premium,” Emkay concluded.

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Despite short-term margin pressures, Emkay believes HDFC Life’s strong execution, credible management, wide distribution, and brand strength position it well for consistent growth. It retained its Jun-26E TP of Rs 850, reiterating that the company justifies a valuation premium over peers.

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