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HDFC Life reported satisfactory overall performance in 2Q/1HFY27, with key numbers broadly in line with our estimates. The key positive was the muchawaited growth revival in the last two months, while early-bucket persistency saw a marginal dip. The management expects growth momentum to sustain for the rest of the year and aims to deliver VNB growth in line with or slightly ahead of APE growth in FY27. With growth reviving in HDFC Bank and margins stabilizing post GST ITC loss, we expect the company to move toward 15-25-15 (15% APE growth, 25% VNB margin, and 15% operating ROEV). To reflect 2Q developments and management commentary, we marginally tweak our FY27- 29 estimates, leading to broadly unchanged estimates, and reiterate BUY with an unchanged Sep-27E TP of Rs700

Growth revival is the key positive

With APE for 2QFY27 at Rs47.3bn (+12.9% yoy) and VNB of Rs11.6bn (+14.8% yoy), resulting in a VNB margin of 24.5%, HDFCLIFE’s 2QFY27 numbers were broadly in line with our estimates. The key positive in the results was the revival in overall retail business growth in the last two months of the quarter, with Retail APE growth of 12% yoy for the quarter in the HDFC Bank channel coming in better than the company’s overall retail APE growth. Driven by the impact of market conditions on ULIPs and some cohorts of recentyear non-par products, persistency in 13/25th-month buckets saw a marginal dip. Operating ROEV was stable at 14.9%, but investment variance on account of muted equity market and rising yield drove modest EV growth of 11.6% to Rs664.6bn.

Regulatory transition to be keenly watched

With the GST exemption impact (positive on growth, especially of retail protection, and slightly negative on margins) behind, the growth and margin trajectory over the coming quarters will be key to watch as the new commission/EoM regulations come into force starting FY28. The management remains confident of delivering growth and margins under the new regulatory regime, albeit with some initial disruptions. Implementation of Ind-AS from FY28 and the Risk-based Capital (RBC) Solvency regime from FY29 will drive major changes in the presentation of financials and capital position. The company saw its solvency ratio dip to 180% in 2QFY27 on account of growth in high-capitalconsumption products. The company announced raising Rs5bn of sub-debt, which will aid its solvency. The management sees a favorable impact on its capital position once RBC comes into force

Reiterate BUY with unchanged TP of Rs700

To reflect 2Q developments and management commentary, we tweak our FY27-29 estimates, leading to a minor 0.3ppts cut in our VNB margins and driving ~1% cut in VNB estimates, while other key numbers remain broadly unchanged. As growth rebounds in the HDFC Bank channel and upcoming tighter expense and commission regulations improve market discipline, we expect HDFCLIFE to progress on its 15-25-15 journey, driving a gradual re-rating of the stock. We reiterate BUY on the stock with an unchanged Sep-27E TP of Rs700.

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