Sharekhan Bets On This Bluechip Private Insurance Stock For 29% Return, ULIP Grew To 41%

Sharekhan, a top brokerage firm recommends investors to buy the stock of ICICI Prudential Life Insurance Company (IPRU). "We believe the structural story for the insurance sector continues to be attractive with a long runway for growth and strong players are likely to be well placed in terms of pricing and growth. IPRU's strong balance sheet, comfortable solvency, and structural growth potential are long-term positives," Sharekhan mentioned.

Stock To Buy: Target Price

The Current Market Price (CMP) of ICICI Prudential Life Insurance is around Rs. 510. Sharekhan has estimated a Target Price for the stock at Rs. 660. This stock has the potential to give a 29.41% return, in the upcoming 1 year. It is a large-cap stock with a market capitalization of around Rs. 72,560 crore.

Stock Outlook
Current Market Price (CMP)	Rs. 510
Target Price	Rs. 660
Potential Upside	29.41%
52-week high share price	Rs. 679.95
52-week low share price	Rs. 430

Strong financials

ICICI Prudential Life Insurance (IPRU) reported ~39% q-o-q and 3% y-o-y growth in net premium income, led by non-linked savings and group protection. Value of new business (VNB) grew by ~21% y-o-y in Q2FY2023 to Rs. 621 crore. VNB margin expanded to 31% in Q2FY2023 versus 26% in Q2FY2022, aided by better product mix with higher share of annuity, non-linked, and group protection products. With the company's focus on diversification and better product mix, share of protection in the APE mix improved to 19% vs. 14% in Q2FY2022. The share of ULIPs stood at 41% in Q2FY2023 vs. ~51% in Q2FY2022.

Stock Upside

Giving a buy rating, Sharekhan stated, "IPRU currently trades at 2.1/1.8x its FY2023E/FY2024E EVPS, which we believe is reasonable as the strategy of approaching customers with a wider product bouquet through all channels will also boost premium growth. We believe the company is expected to deliver a 17% CAGR in VNB over FY2022-FY2024E, driven by premium growth and margin improvement, thus enabling operating RoEV at ~17% in FY2024E. We have fine-tuned our estimates and our target multiple. We maintain Buy with an unchanged target price of Rs. 660.

Strong VNB Growth

Management reiterated its stated objective to focus on absolute VNB growth. It is well on track to achieve its guidance to double to FY2019 VNB by FY2023E, implying 23% y-o-y growth in VNB in FY2023E through better product mix, coupled with strong distribution capabilities. The strategy of having diversified products helps to add new distribution channels. Non-linked savings, group protection, and annuity segments are supporting growth.

Company Portfolio

IPRU is promoted by ICICI Bank Limited and a foreign partner headquartered in United Kingdom. The company began its operations in fiscal 2001 and has consistently been among the top private sector life insurance companies in India on a Retail Weighted Received Premium (RWRP) basis. The company offers an array of products in the protection and savings category, which match the different life stage requirements of customers, enabling them to provide a financial safety net to their families as well as achieve their long-term financial goals.

Disclaimer

The above stock was picked from the brokerage report of Sharekhan. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.