LIC share price deep in red this year, but may gain well now; analysts bullish, see this much upside

LIC share price has had a weak performance on the stock exchanges since listing earlier this year, but it may soon make money for investors with as much as 20% upside. LIC stock is down 20% since listing on the BSE and NSE, but analysts believe it can recover losses, considering the quarterly earnings performance of the company. Analysts at Motilal Oswal have reiterated ‘buy’ call on LIC scrip with a target price of Rs 830 per share translating to a 20% upside from Wednesday’s levels. LIC reported a net profit of Rs 682.88 crore during the April-June quarter compared to a profit of just Rs 2.94 crore in the same period last year which was marred by the second wave of covid-19.

Results at a glance

During the quarter in review, LIC’s total income stood at Rs 1.68 lakh crore against Rs 1.54 lakh crore in the year-ago period. The insurance behemoth reported net premium income of Rs 98,351.76 crore during the quarter. This was close to 20% more when compared to the previous year. LIC Chairman MR Kumar said that the company sold 36.91 lakh policies in the individual segment in the April-June quarter, an increase of 59.52% on-year. He added that the solvency margin for the quarter ended June was 188.54 against 173.34 for the year-ago period.

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“In terms of NBP, the share of PAR products was lower at 70%. Annuity or Pension/ULIPs constituted the bulk of residual with a 23%/5% share. Both these segments saw strong growth in 1QFY23. We expect the momentum to sustain, led by the introduction of new products,” said analysts at Motilal Oswal. The brokerage firm added that individual NBP grew 36% on-year during the quarter while the share of PAR products was stable at 70%. Annuity or Pension/ULIP constituted 23%/5%. The share of Term plans remains low at 0.4%.  

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LIC’s quarterly performance showed that it has now increased its market share to 44% in Individual business and 76% in Group business. LIC management highlighted that the renewal book has remained strong during the quarter.

LIC Share Call: ‘Buy’; check target price, upside

Motilal Oswal has revised its FY23/FY24 VNB margin by ~200bp/~100bp to 14.2%/14.6%, and raised its VNB estimate by 24%/18%. “We expect LIC to deliver a 13% CAGR in APE over FY22-24, thus enabling 14% VNB CAGR. However, we expect operating RoEV to remain modest at 12.4%, given its lower margin profile than private peers,” they added. Analysts noted that LIC has all the levers in place to maintain its industry-leading position and ramp up growth in the highly profitable product segments. The company is valued at 0.7x FY24E EV which analysts said appears reasonable, considering the gradual recovery in margin and diversification in the business mix. The target price of Rs 830 per share suggests a close to 20% upside. 

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