HDFC Life Shares Breakout After Q1 Value Creation Beat; Nomura Upgrades to 'Buy' with 29% Upside Potential
Shares of HDFC Life Insurance Company Ltd surged nearly 2 percent to emerge as the top gainer on Nifty 50 in early trade on Thursday. This breakout followed the release of fiscal first quarter results that exceeded Street expectations regarding value creation.The private life insurer saw its shares rise as much as 2.2 percent to Rs 580 during early trading. The stock had closed at Rs 567.20 on Wednesday, marking a 2.16 percent gain ahead of the earnings report. However, the stock remains down 24.4 percent so far in 2026.
Superior Value of New Business and Margin Performance
The insurer delivered a resilient performance for the April-June quarter as the value of new business (VNB) rose 8.5 percent year-on-year to Rs 879 crore. This figure outperformed the CNBC-TV18 poll estimate of Rs 842 crore.VNB margin remained steady at 25 percent, which sits comfortably above the Street expectation of 24.3 percent. This performance reflects a continued corporate focus on profitability despite changes in the tax regime.
Annualised Premium Equivalent (APE) increased 8.8 percent year-on-year to Rs 3,515 crore, while retail APE grew 6.9 percent to Rs 2,969 crore. New business premium also saw a 12 percent growth to reach Rs 8,143 crore, which was broadly in line with market expectations.
Profit after tax increased by 12 percent to Rs 611 crore during the quarter. Furthermore, the company's assets under management crossed the Rs 4 lakh crore milestone.
Management Insights on Underlying Growth and GST Impact
Management stated that the company continues to benefit from a value-focused product mix and healthy traction in its protection business. These factors have been central to the company's recent operational strategy.Chief Financial Officer Niraj Shah highlighted that VNB margin would have reached 25.6 percent, compared with 25.1 percent a year earlier, if the impact of GST were excluded. He noted that underlying profit growth stood at 17 percent during the quarter when excluding that specific impact.
Nomura Upgrades Rating with Significant Upside Target
Following the earnings announcement, brokerage firm Nomura upgraded HDFC Life to a 'Buy' rating and raised its target price to Rs 730. This implies an upside of approximately 29 percent from Wednesday's closing price.The brokerage reported that the company delivered a VNB margin beat of around 100 basis points. While the GST-related drag on profitability is expected to persist for one more quarter, Nomura maintains a positive outlook on growth.
Nomura expects HDFC Life to deliver 12 percent APE growth and 14 percent VNB growth in FY27. The firm noted that while the bancassurance channel remains weak, improving trends in the agency channel provide confidence in earnings growth.
The brokerage highlighted that a better product mix and resilient profitability support a moderate growth outlook. It suggested that the stock's current valuation offers an attractive entry point for investors.
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