Motilal Oswal Financial Services has maintained its BUY recommendation on HDFC Life Insurance, emphasizing the company's robust fundamentals, shifting product mix, and compelling long-term prospects. With a target price of Rs 910, translating into a projected upside of 20% from the current Rs 757, Motilal Oswal is positioning HDFC Life as a clear outperformer in India's evolving insurance sector.

Resilient Topline Performance Underpins Optimism

1. HDFC Life registers consistent premium growth.
The company’s net premium income reached Rs 148.8 billion in 1QFY26, up 16% year-on-year. Individual and group APE (Annualized Premium Equivalent) saw respective growth rates of 13% and 12%, powered by continued renewal and single premium collections and higher average ticket sizes.

2. Value of New Business expands, albeit at moderated margins.
Value of New Business (VNB) rose 13% to Rs 8.1 billion vs. the year-ago period, though margins softened to 25.1% compared to 26% estimated earlier. The margin contraction is attributed to product mix shifts toward lower yield segments, in line with management’s guidance for “flattish” VNB margins in the near term.

Strategic Channel Expansion and Distribution Transformation

3. Agency-led distribution model accelerates expansion.
HDFC Life focused on building out its distribution platforms, notably through the agency channel. Around 23,000 agents were recruited in the quarter, and new branch openings now comprise a high single-digit share of business, reflecting improved branch-level profitability.

4. Multi-channel distribution remains a core pillar.
The agency channel reported a double-digit CAGR, while bank partnerships and digital integrations continued to diversify the customer funnel. Notably, the direct channel experienced an 8% decline in growth, in contrast to robust expansions from brokers and agents.

Product Mix Realignment in Response to Market Conditions

5. ULIPs maintain share despite changing preferences.
Unit Linked Insurance Plans (ULIPs) retained a 33% share of APE, levered by buoyant capital markets. The par (participating) segment’s contribution rose to 27% (from 14%), propelled by relaunches and new offerings, while the non-par segment dipped temporarily amid pricing disruptions.

6. Non-par products set for recovery.
Management anticipates the non-par mix to normalize and recover to the mid-20% range, supporting margin growth, while the par segment is expected to stabilize around 25% for FY26.

Profitability and Financials: Enduring Robustness

7. Profits outperform estimates.
Shareholders’ PAT for 1QFY26 was Rs 5.5 billion, an 11% beat over analysts’ projections, cemented by a 15% increase in back-book profits and resilient renewal collections, which grew by 19% YoY.

8. Embedded Value climbs, solvency remains strong.
Embedded Value (EV) expanded 18% YoY, standing at Rs 584 billion as of June 2025, with a sturdy 17.6% Return on EV (RoEV). The solvency ratio was measured at 192%, well above regulatory norms.

Outlook: Guidance and Valuation Anchors

9. Management forecasts stronger H2 performance.
Motilal Oswal highlights management’s projection that H2FY26 growth will outpace H1FY26. However, full-year growth is expected to lag behind FY25’s numbers, informed by recent regulatory and taxation changes impacting high-ticket policies.

10. BUY call justified by operational levers and valuation comfort.
The brokerage trims its VNB margin assumptions by 50bps each for FY26 and FY27, mirroring Q1 performance. Nevertheless, with a target price of Rs 910 (2.6x FY27E EV), the risk/reward remains attractive for long-term investors.

Stock Levels and Target Price Matrix

Below is an at-a-glance summary of key stock levels, growth metrics, and valuation benchmarks:

Sector Leadership and Forward-Looking Strategy

11. Market share advances despite turbulence.
HDFC Life increased its overall market share by 70 basis points to 12.1%, underlining its strength in protection products and long-term customer retention.

12. Innovation and digitalization remain central to future growth.
The insurer continues to prioritize digital integration, cross-selling initiatives, and channel expansion to augment market reach and client experience.

Investor Takeaways: Positioning for the Next Decade

13. Youthful customer acquisition provides a pipeline for growth.
Approximately 70% of new customers in 1QFY26 were first-time buyers, both pan-India and across urban-rural demographics, supporting deeper penetration in emerging regions.

14. Prudent cost management and reinvestment support fundamentals.
Management is reinvesting margin gains into distribution, agent additions, and transformation programs, laying the groundwork for sustainable long-term profitability.

Bottomline for Investors: Compelling Buy on Corrections, Hold for Growth

Motilal Oswal’s analysis delivers a persuasive rationale for investors to accumulate HDFC Life Insurance at current levels, with a focus on the Rs 910 target price. The blend of strategic realignment, disciplined margin management, and channel innovation, combined with a strong balance sheet, makes HDFC Life a central holding for those seeking exposure to India’s insurance growth story. Investors are advised to monitor product mix evolution and persistency ratios as lead indicators for future re-rating.