HDFC Life shares fall 5% as Q2 results fail to impress the Street. Should you buy, sell or hold?

Shares of HDFC Life Insurance Company fell 4.6% to an intraday low of Rs 726.15 on the BSE on Thursday, October 16, even after the insurer reported a 3% year-on-year (YoY) rise in consolidated PAT for Q2 FY26. The company posted a net profit of Rs 448 crore, up from Rs 435 crore in the same quarter last year.

Alongside the marginal YoY profit growth, HDFC Life saw a strong improvement in net premium income (NPI). The company reported a 14% YoY increase in NPI, with collections reaching Rs 18,871 crore for the quarter ended September 30, 2025, compared with Rs 16,614 crore in Q2 FY25.

Sequentially, HDFC Life witnessed a decline in profitability. Its Q2 PAT of Rs 448 crore represented an 18% drop compared to Rs 548 crore in Q1 FY26. Despite this, the company reported a robust sequential rise in net premium income (NPI), which jumped 30% from Rs 14,539 crore in Q1 to Rs 18,871 crore in Q2 FY26.

Here is what brokerages are saying:

Morgan Stanley: Overweight | Target price: Rs 875

Morgan Stanley has maintained an “Overweight” rating on HDFC Life with a target price of Rs 875. The company reported 8% YoY growth in Value of New Business (VNB), slightly below estimates due to a GST-related margin impact of ~300 basis points. Management expects this margin drag to normalize over the next two to three quarters, turning positive by FY26-end.

Retail protection Annualized Premium Equivalent (APE) surged 50% YoY in September 2025, supported by the GST exemption, which could offset the impact of Insurance Transaction Cost (ITC) changes sooner.
HDFC Life has guided for APE growth of ~14% in FY26 and approximately 15% in FY27–28. VNB margins are expected to improve gradually, reaching 26% by FY28. The GST impact, estimated at roughly 300 bps, is attributed equally to commissions and other costs. Recovery is expected through strategic pass-throughs, better product mix, and higher rider attachment.
Morgan Stanley sees a 12-month upside potential of ~15% for the stock. HDFC Life currently trades at 19x FY27E Price to VNB (P/VNB) and 2.2x Price to Embedded Value (P/EV).

Goldman Sachs: Buy | Target price: Rs 865

Goldman Sachs has maintained a “Buy” rating, revising its target price to Rs 865 from Rs 900. HDFC Life delivered in-line Q2 FY26 performance, with VNB rising 8% YoY, in line with topline growth.

Growth was driven by Par (participating) products, which more than doubled YoY, and Unit Linked Insurance Plans (ULIPs), which grew 42% YoY—23% above estimates, supported by improving equity market sentiment.

VNB margins remained stable QoQ at ~24%, aided by a better product mix that offset negative impacts from surrender regulations and GST (~90 bps margin hit).

Due to these margin pressures, Goldman Sachs has lowered VNB margin estimates by 5–7% for FY26–28 to reflect continued GST-related headwinds.

Nuvama: Buy | Target price: Rs 910

Nuvama has maintained a “Buy” rating, revising the target price slightly to Rs 910 from Rs 920, based on P/EV multiples of 2.2x for FY27E and 1.9x for FY28E.

In Q2 FY26, APE growth was 8.7% YoY, 1% below estimates. Retail and Group segments grew 8.8% and 7.4% YoY, respectively.

The quarter was impacted by non-availability of GST ITC, revised surrender norms, and lower fixed-cost absorption, partially offset by strong protection sales (+24.1% YoY).

VNB margin declined 25 bps YoY to 24.1%, and VNB stood at Rs 10.1 billion, reflecting 7.6% YoY growth but 3.7% below expectations.

Amid muted growth and persistent margin pressures, Nuvama has revised down VNB and VNB margin estimates for FY27–28, now expecting VNB growth of 1.9% and 0.4% and VNB margin compression of 104 bps and 86 bps, respectively.

Also read: Tata Motors demerger: Listing date, share price and what’s next for 67 lakh shareholders

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)