Stock To Buy: This Large Cap Insurance Stock Likely To Surge 21%, Recommended By Motilal Oswal

Motilal Oswal Financial Service, a leading brokerage firm, in its report on ICICI Prudential Life Insurance Company Ltd has given a 'buy' rating for a target price of Rs 630 per share. It sees potential gains of 19% considering the Target Price and the Current Market Price. The management of the company is satisfied with the performance of the 4Ps of its business strategy. It should achieve its objective of doubling FY19 absolute VNB by FY23. Beyond FY23, the VNB growth rate should be in line with that of the industry.

ICICI Prudential Life Insurance Stock Outlook

The previous close of the stock on Friday was Rs 517.0 per share. Today it opened at Rs 520 per share, the current market price is Rs 520.05 per share. The 52-week low level of the stock was recorded on 08th March 2022 at Rs 430 per share, while the 52-week high level was recorded on 08th September 2021 at Rs 724 per share. The share of the company is trading at Rs 90.05 above the 52-week low level and Rs 204.25 below the 52-week high level of the stock.

 The ROE of the stocks is 8.18%. The PE ratio is 98.74 at the time of writing. PB ratio is 8.21. Face value is 10. EPS is Rs 5.28.

The stock has slid down nearly 0.76% in the previous week, however, it gained roughly 2.11% in the past 1 month. In the past one year, the stock price has fallen 17.039%. However, it performed well on long-term investment. It has gained almost 35% in the past 3 years and 8.78% in 5 years, respectively.

The stock has likely to surge 21% in 12 months considering the Current Market price & the estimated Target Price of the stock by the brokerage.

Reiterates guidance to double FY19 VNB by FY23

ICICI Prudential Life Insurance posted a 24.7% YoY growth in new business APE, led by an all-round growth of 25%/22% in Savings/Protection. Within Savings, Annuity/NonLinked/ULIPs grew 69%/41%/15% YoY. VNB grew 31.6% YoY to INR4.7b (inline). This was primarily driven by a 128bp QoQ improvement in VNB margin to 31% in 1QFY23. ICICI Prudential Life Insurance remains on track to achieve its stated objective of doubling FY19 VNB by FY23.

The brokerage said, "With adequate growth and margin levers available, we estimate the ICICI Prudential Life Insurance to meet its guidance, which entails ~23% VNB growth in FY23. We expect IPRU to deliver 24% CAGR in VNB over FY22-24, largely led by healthy premium growth and steady margin, thereby enabling operating RoEV at 17% in FY24."

 

Margin accretion encouraging; distribution mix getting broad-based

Net premium income grew 4% YoY in 1QFY23, led by healthy new business premium. However, it missed our estimate by 16% due to decline in renewal premium. PAT fell 16% QoQ to INR1.56b in 1QFY23. The share of Protection in the overall mix improved by 420bp QoQ to 21.7% in 1QFY23. Within Protection, demand for Retail Protection remains weak, while Credit Life saw a strong traction, led by buoyed disbursements. Annuity APE grew 69% YoY in 1QFY23. On a NBP basis, it constitutes 18% of the mix. The pension subsidiary clocked a strong performance. ICICI Prudential Life Insurance remains committed to scaling this segment further. ULIPs grew 15% in 1QFY23, lower than the overall growth of 25% due to a volatile capital market. The ULIP mix declined to 41% from 45% in 4QFY22.

On the distribution side, slack in the banca channel was picked up by new partnerships and the agency channel. While sales at new bank partnerships is performing well (up 71% YoY), sales from ICICIBC (down 11% YoY) continues to drag overall banca growth. The management's strategy on the direct channel, which contributes 11% to APE, remains to upsell to its existing customers through data analytics. Persistency improved across cohorts, with 13th/61st-month persistency improving 90bp/100bp QoQ to 85.5%/55.7%. VNB growth of 32% YoY to Rs 4.7b in 1QFY23 was led by a higher share of higher margin products like Non-PAR savings, Annuity, and Protection.

Highlights from management commentary

The management is satisfied with the performance of the 4Ps of its business strategy. It should achieve its objective of doubling FY19 absolute VNB by FY23. Beyond FY23, the VNB growth rate should be in line with that of the industry. The industry has addressed only 12-13% of the addressable market for Protection, and hence the opportunity size remains huge. Volatility in the capital market and muted demand for Retail Protection drove the weakest sales performance from the ICICIBC channel.

Valuation and view- Suggests Buy For a Target Price of Rs 630 per share

As per Motilal Oswal, "ICICI Prudential Life Insurance has maintained steady traction in VNB growth, led by a healthy product mix and APE growth. The share of banca (excluding ICICIBC) has risen to 15% v/s 4% in FY19, thus aiding growth and diversification in the distribution mix. The increase in agent recruitment and the strong pace of adding new partnerships will continue to support premium growth. The idea of approaching customers with a wider product bouquet, through all channels, will further boost premium growth"

Motilal Oswal said, "We expect VNB margin to improve marginally and expect ICICI Prudential Life Insurance to deliver 18%/24% CAGR in new business APE and VNB over FY22-24, thus enabling an operating RoEV of 17% in FY24. We maintain our Buy rating with a Target Price of Rs 630/share (2.1x FY24E EV)."

Disclaimer

The stock has been picked from the brokerage report of Motilal Oswal Finacial Services. 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.