Buy This Large Cap Insurance Stock For 18% Upside, Dividend Declared, Record Date Fixes In August

Motilal Oswal has a buy call for Life Insurance Corporation of India (LIC) for a target price of Rs 830 per share. The company has recently announced the dividend for the year ending March 2022. LIC disclosed its Indian Embedded Value (IEV) and other key numbers mainly VNB, margin, and sensitivity data for FY22. The key highlights of these details are mentioned below.

Stock Outlook

Today, LIC opened at Rs 719.45 per share, currently trading at Rs 707.70 per share. The previous close was 712.30 per share. The stock recently got listed on the stock exchange in May 2022. In the last 1 month, it has gained 2.58%, whereas, in the last 1 week it has fallen 0.02%.

The recently listed on the stock exchange, on 03 June 2022, it touched its lowest on May 172022 at Rs 872 per share, touched its peak at Rs 918.95 per share on NSE. It touched its low at Rs 650 per share.

Motilal Oswal has estimated a target price of Rs 830 per share. Investors buy the stock at the Current Market Price the investors can expect a surge of 18% in 12 months.

Dividend

For the year ending March 2022, on May 31, 2022, the company has declared its first dividend, a final dividend of 15% amounting to Rs 1.50 per share. The declared final dividend is turning ex-dividend next month on 25 August 2022. The company also announced the record date for the dividend. Its record date is 26 August 2022, a day after the ex-dividend date.

 

Business Updates

• Embedded value (EV) stood at Rs 5.41t in FY22 (broadly similar to the last disclosed EV for Sep'21; 4.7% lower v/s our estimate). EV is significantly higher in FY22 as compared to FY21 levels due to the bifurcation of a single fund into a separate PAR and Non-PAR fund, pursuant to changes in the LIC Act in FY22.
• Value of New Business (VNB) stood at Rs 76.2b in FY22, 34% above our estimate of Rs 56.7b. VNB grew 83% YoY in FY22 v/s an 11% growth in APE to Rs 504b.
• VNB margin improved to 15.1% in FY22 v/s 9.9% in FY21. This is significantly ahead of our estimate of 10.7% in FY22. We are awaiting further details.
• The individual business accounted for 71% of APE, with the residual being contributed by the Group business. Within Individual, share of participating products grew marginally by ~130bp YoY to 92.9% in FY22. The balance 7.1% accrues from Non-PAR products.
• RoEV stood at 11.9% in FY22 as compared to 36.9% in FY21.

Motilal Oswal Suggests Buy for Rs 830 per share, sees 18% upside

LIC has all the levers in place to maintain its industry-leading position and ramp up growth in highly profitable product segments (mainly Protection and Non-PAR Savings/Annuity). However, changing gears for such a vast organization requires superior and well-thought execution that also has to endure frequent rotation at the top management level.

The brokerage stated, "We estimate LIC to deliver ~10% CAGR in NBP over FY22-24, while improving margin trajectory and stability in the capital market will enable improved EV growth going forward. LIC's valuation at 0.7x FY24E EV appears reasonable considering the gradual margin recovery and diversification in the business mix. We maintain our Buy rating with a Target Price of Rs 830 per share, based on 0.8x FY24E EV."

Disclaimer

The stock has been picked from the brokerage report of Motilal Oswal. Greynium Information Technologies, the Author, and the respective Brokerage House 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.