Last week, LIC said that its first-quarter profit increased by almost fourteen times because it moved money to a fund for owners to help its bottom line.
The key bread-and-butter segments of Par (participating) and Group (group) decreased on a year-over-year basis, but the non-Par (non-participating) section managed to grow on a year-over-year basis. Analysts said that APE growth was slow, but they think it will speed up. A few of them think that the stock’s price is low and that it could go up by 15% to 43% in the next 12 months.
Even though YES Securities changed the stock’s rating from “Buy” to “Hold,” the stock’s goal price of Rs 775 shows that it could go up by 15%.
“VNB’s profit has been under pressure, mostly because LIC has changed the prices of its goods to make them more competitive. These price changes might not last forever, and LIC will keep looking at them. Interest rate changes have also had an effect on the VNB cushion. On the other hand, the net VNB margin of the Group business has gone up from 10% to 13.9%, thanks to a bigger share from the Annuity business and better persistency results. Because of this, the general net VNB profit went up by 6 bps year over year, YES Securities said.
The insurance company said last week that its first-quarter profit went up by almost 14 times because it moved money to an owners’ fund to help its bottom line. For the quarter that finished on June 30, the company made Rs 9,544 crore after taxes, which is a lot more than the Rs 683 crore it made the same time last year.
LIC’s main strengths are its big customer base (27.8 crore in-force individual policies), huge agency network (made up 50.9% of all industry agents as of June ’23), strong brand value, and, most importantly, the sovereign guarantee (on sum assured and bonuses) that comes with LIC policies. Together, these considerations and the cyclical tailwinds for the insurance sector should aid in a re-rating of LIC’s shares. JM Financial said, “We expect the EV to go up, which will be helped by continued growth in APE and a small rise in VNBs.”
The firm said that LIC’s value of 0.5 times FY25 EV is not demanding and that it expects LIC to be rerated soon. The brokerage’s goal price for the stock is Rs 940. The stock has a goal price of Rs. 917 from ICICI Securities, which said that the valuation multiple accurately shows the risk of EV’s vulnerability to market movement.
“Throughout the year, we anticipate a recovery in volume and profit. Even though time differences will likely cause the group segment’s premium growth to catch up, margins usually get better over the course of the year as costs are spread out over a larger premium base, the report said.
Motilal Oswal Securities said that LIC has the tools it needs to keep being the leader in its industry and to speed up growth in its most valuable product groups, which are mostly Protection, Non-PAR, and Savings Annuity. But, it said, for such a large outfit to switch gears, a better and well-thought-out plan of action is needed.
“We expect LIC to have a 15% CAGR in APE from FY23 to FY25, which will allow a 27% CAGR in VNB. But we think the running RoEV will stay low, at 10.9%, because it has lower margins than private peers and a big number of EVs. “LIC is selling at 0.6 times FY24E EV, which seems fair given that margins are slowly getting better and the business mix is becoming more diverse,” said Motilal Oswal Securities, which has a Rs 850 price goal for the stock.
