Life Insurance Corporation of India, which completed its one year of listing in May 2023, has again slipped below Rs 600. The stock has emerged as the biggest wealth destructor for the investors, wiping out more than Rs 2.23 lakh crore from investors' wealth as its market capitalization dropped to Rs 3.77 lakh crore from Rs 6 lakh crore.
LIC was the biggest IPO in Indian history as the Government of India offloaded its 3.5 per cent stake or 22.13 crore equity shares of the company at Rs 949 apiece to raise a little more than Rs 21,000 crore. The stock is more than 37 per cent down from its issue price. However, even after a year of debut at Dalal Street, analysts remain mixed on the LIC shares, with most of them having a positive view. Interestingly, despite the severe wealth erosion in terms of mcap, LIC has no 'sell' ratings so far.
According to the data from Trendlyne, LIC has a consensus 'buy' rating from the analysts, with 12 out of 15 experts having a 'buy' or 'strong buy' rating, while three analysts have a 'hold' rating on the stock. The stock has an average target price of Rs 807, suggesting an upside of 36 per cent from current prices.
LIC reported expansion in the calculated VNB margin to 19.2 per cent in 4QFY23 from 14.6 per cent in 9MFY23, even as APE was down 7 per cent YoY, largely due to trued-up assumptions in the group business, said Kotak Institutional Equities. LIC appears to be on track for steady VNB growth. valuations provide enough buffer, it said with a 'buy' rating and fair value at Rs 1,000.
ICICI Securities has maintained its buy rating on LIC with an unchanged target price of Rs 917 based on high EV sensitivity to market movement. "We have estimated 10-12 per cent growth in APE, VNB margin of 17-18 per cent and unwind of 9 per cent, each, for FY24 and 25E, respectively," he said.
JM Financial said the current valuation of LIC at 0.5 times FY25E EV is undemanding and expects the stock to rerate on the back of strengths such as a large customer base, huge agency network, strong brand equity and, importantly, the sovereign guarantee attached to LIC policies. It has retained its 'buy' rating on the stock with a target of Rs 940.
The target prices of Kotak Institutional Equities, ICICI Securities and JM Financial suggest an upside potential of 55-70 per cent in the insurance behemoth from the current levels. The stock marginally up, hovering around Rs 594 on Thursday.
However, not every analyst is going all guns blazing on the stock. A few have suggested remaining cautious on the stock, citing limited upside potential in the state-run insurance major.
Lower tax provisions led to a PAT of Rs 36,400 crore, which stood 30 per cent above our estimates. EV as of FY23 stands at Rs 5,82,200 crore, having clocked a growth of 7.5 per cent, largely led by positive operating assumption changes and lower impact of negative economic variances, Emkay Global reiterated with a 'hold' rating on the stock, with a revised target price of Rs 660 apiece.
LIC aims to regain its market share which was lost to private insurers in FY23 by introducing products that fit the market, relying on its robust distribution network and altering the existing product as and when needed. It expects growth from non-par and annuity products which will lead to improvement in margins while maintaining leadership in par products, said Religare Broking, revising its rating to 'hold' with a target price of Rs 646.(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Business Today)
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