Shares of Life Insurance Corporation of India Ltd (LIC) are up 26 per cent year-to-date and 78 per cent in the last one year and, if one goes by what market analysts say, the stock has potential to rise up to Rs 1,300 level in the next 12-months. LIC's strategy stays pivoted on the rising share of non-par products in the product mix and on delivering absolute VNB growth, said analysts The LIC management expects annual premium equivalent (APE) growth to improve from hereon, propelled by product launches across categories.
LIC’s focus on digital initiatives is likely to drive customer acquisition and customer servicing, Emkay Global said.
"To bake-in the Q3FY24 developments, we increase our VNB margin estimate by 1 percentage points and of APE by 3 per cent, which results in 9-11 per cent growth in FY24E-26E VNB. After the stellar run-up in the stock price post our upgrade (57 per cent outperformance vs NIFTY), we take a breather and move to 'ADD' rating from 'Buy’, with our revised Dec-24E target of Rs 1,200/share (from Rs 975 earlier), implying Dec-25E P/EV of 0.9 times," Emkay Global said. VNB stands for value of new business.
Kotak Institutional Equities has raised its fair value on LIC to Rs1,300 from Rs 1,040 and revised up embedded value (EV) estimate by 5.7-6.8 per cent, largely reflecting higher unrealised gains and the recent market rally. Tailwinds to LIC's equity portfolio provide a further upside, the brokerage said.
The LIC management remained confident of maintaining/ increasing the share of non-par, further driving higher VNB growth, said Antique Stock Broking. "Factoring the 3Q beat, we increase our FY24–26E VNB by 13–14 per cent and increase our DCF-based target price to Rs 1,080 (earlier Rs 780) implying 0.8x FY26E P/EV," the brokerage said.
In its LIC earnings review, Motilal Oswal said that the life insurer has levers in place to maintain its industry-leading position and ramp-up growth in the highly profitable product segments (mainly Protection, Non-PAR, and Savings Annuity).
"However, changing gears for such a vast organisation require a superior and well-thought-out execution plan. We expect LIC to deliver a 6 per cent CAGR in APE over FY23-26, thus enabling a 12 per cent VNB CAGR. However, we expect operating RoEV to remain modest at 10.7 per cent in FY26, given its lower margin profile than private peers and a large EV base," the brokerage said.
Considering the gradual recovery in margin and diversification in the business mix, Motilal Oswal has raised its VNB estimates to factor in the increase in VNB margins. It also raised its EV estimates owing to better than expected equity market returns and suggested a target of Rs 1,270 on the stock.
JPMorgan has reportedly upgrade LIC stock to 'overweight' from 'neutral' with a target of Rs 1,340.
"VNB margins improved during the quarter led by the improvement in share of high margin products. Company plans to launch new products and increasing market share in both individual and group business segments. We have a long term positive outlook," Arihant Capital Markets said.
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