HDFC Life Q2 Review — GST Impact Emerges As A Margin Monitorable, Says Yes Securities Maintaining 'Add'

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Yes Securities Report

We maintain an ‘Add’ rating on HDFC Life Insurance Company Ltd. with a revised price target of Rs 870.

Calculated VNB margin for Q2 FY26 was 24.1%, down -22 bps QoQ and -99 bps YoY. The gross impact on VNB margin due to a 10% rise in acquisition cost is 3%.

Management stated that they would be having conversations with distributors both from a perspective of commission as well a product mix with a margin backdrop.

The impact will be mitigated over two-three quarter and the attempt would be to wrap it up in 2 quarters. The company is capacitised for 16-18% but is growing at 10% and this may continue to be a drag on margin.

Par mix has gone up but is close to company average margin whereas one fourth of ULIP business happens at higher sum assured which more than makes up.

Non-Par mix has gone down due to pricing discipline. Management expects a pick of Non-Par business in the second half and Non-Par margin will be better due to increase in yield at the longer end of curve.

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