Buy The LIC Stock, Says Motilal Oswal, Sees 34% Upside

Broking firm Motilal Oswal has a "buy" call on the stock of LIC with a target price that is 34% higher than the current market price.

LIC net profits at Rs 63.3 billion

LIC reported a PAT of Rs 63.3 billion in 3QFY23, up 27x YoY. This is a result of the transfer of Rs 56.7 billion from the Non-Par segment to shareholders' accounts (related to accretion on available solvency margin). For 9MFY23, PAT grew 13.7x YoY to Rs 229.7 billion.

"APE came in at Rs 123.2b in 3QFY23 (down 18% QoQ; Rs 375.5 billion in 9MFY23). VNB declined 21% YoY to INR18.0b as VNB margin moderated by 60bp QoQ to 14.6% in 3QFY23. For 9MFY23, VNB margin stood stable at 14.6% with VNB of INR54.8 billion," the brokerage has said.

VNB Margin declines on sequential basis

On an NBP basis, the share of PAR products moderated QoQ to 66.4%. Annuity/Pension and ULIP constituted the bulk of the residual with a share of 24% and 7%, respectively. Term products contribute only 0.4%.

"The sequential decline in VNB margin was a result of higher growth in the ULIP segment and re-pricing in the Annuity products. Margin in the Individual Par segment improved to 11% from 10.6% in 1HFY23, while the same for Non-Par segment moderated to 63.6% from 68.7% in 1HFY23. Within the group segment, the margin moderated to 12.3% in 9MFY23," Motilal Oswal has said.

Buy the stock for a price target of Rs 830

LIC of India has all the 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 organization requires a superior and a well-thought out execution plan. We expect LICI to deliver a 15% CAGR in APE over FY23-25, thus enabling 21% VNB CAGR. However, we expect operating RoEV to remain modest at 10.4%, given its lower margin profile than private peers. LIC of India is trading at 0.6x FY24E EV, which appears reasonable considering the gradual recovery in margin and diversification in the business mix. We reiterate our Buy rating with a revised target price of Rs 830 (0.8x Sep'24E EV)," the brokerage has said in its report.

Disclaimer

The above-mentioned information is purely informational purposes only. The buy recommendation is picked from the brokerage report of Motilal Oswal. Greynium Information Technologies, the Author and the brokerage are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before taking any investment decision.