Prabhudas Lilladher has initiated a 'Buy' rating on HDFC Life Insurance Company with a price target of Rs 900. The brokerage highlighted strong retail protection demand and healthy ULIP traction. Management anticipates a ~110 basis point impact on 9MFY26 margins due to the loss of Input Tax Credit (ITC) from the GST rate cut, with mitigation efforts expected in Q4. The firm remains focused on driving RoEV of 16%-18% and doubling EV in 4-5 years.
Prabhudas Lilladher Initiates 'Buy' on HDFC Life
Prabhudas Lilladher has issued a 'Buy' recommendation for HDFC Life Insurance Company, setting a price target of Rs 900. The brokerage's stance follows discussions with the company's management regarding growth trends, margin outlook, and the evolving regulatory environment.
Demand Strength and Margin Outlook
The management reported sustained strength in retail protection demand, observing a significant uptick in volumes following the GST rate cut. Unit Linked Insurance Plans (ULIPs) continue to show healthy traction, and Non-Participating (NPAR) business is showing gradual improvement. However, the company anticipates an approximate 110 basis point impact on its margin for the first nine months of FY26 due to the loss of Input Tax Credit (ITC) associated with the GST rate adjustment. Mitigation strategies are expected to offset this in the fourth quarter.
Future Growth Prospects
HDFC Life Insurance remains committed to its strategy of driving Return on Embedded Value (RoEV) between 16% and 18%. The company aims to double its Embedded Value (EV) over the next four to five years. Key drivers for supporting Value of New Business (VNB) growth include protection-led expansion, increasing rider attachment rates, and maintaining cost discipline, even amidst near-term margin pressures.
Analyst Recommendation
Based on these factors, Prabhudas Lilladher retains its 'BUY' rating on HDFC Life Insurance, pegging its target price at 2.6 times the FY27 estimated Price to Book Value (P/ABV).
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