LIC Shares See Best Intra-Day Gains: Shares of Life Insurance Corporation of India (LIC) surged as much as 9 per cent to Rs 682 apiece on the BSE in Monday’s opening session, their best intra-day percentage gain since listing in May, after the country’s largest insurer reported a surge in quarterly profit on Friday.
The country’s largest insurer on Friday reported standalone net profit of Rs 15,952 crore for the quarter ended September, sharply higher than Rs 1,433 crore a year ago. Net premium income for the quarter increased 26.6 per cent year-on-year (YoY) to Rs 1.32 lakh crore. The net income from investments rose 10 per cent YoY to Rs 84,104 crore.
First-year premium income during the quarter rose 11.3 per cent on-year to Rs 9,125 crore. Single premium income increased sharply by 62 per cent to Rs 66,901 crore.
The solvency ratio – that measures an insurance company’s cash flow in comparison to the amount it owes as the total life cover – was at 1.88 per cent as on September 30, similar to that at the end of June quarter.
The company’s gross non-performing assets as on September 30 was Rs 26,111 crore, compared with Rs 26,619 crore a quarter ago, and Rs 28,929 crore a year ago.
What Should Investors Do?
“Increasing non-participating mix and change in surplus distribution policy are significant growth drivers of value of new business (VNB) and in turn embedded value (EV). This, against the strong growth outlook of the Indian life insurance (especially through lens of sum assured), makes LIC a strong investment proposition. Concerns on equity sensitivity to EV is overdone and the relative ease of increasing VNB margin through change in mix is under-appreciated,” said ICICI Securities. The brokerage house has maintained Buy rating on LIC shares with a target price of Rs 917 apiece.
“Long term investors should wait for the possible breakout looking at Rs 700 levels on chart pattern. The insurance stock is expected to give strong upside movement after closing above Rs 700 apiece levels. Currently, the stock has support at Rs 630 but on breaching this support, LIC shares may go up to Rs 580 levels. So, long-term investors are advised to wait for the breakout and breakdown. They should buy either at Rs 600 apice levels keeping stop loss below Rs 580 or above Rs 700 levels keeping stop loss at Rs 630 apiece levels,” said Sumeet Bagadia, Executive Director at Choice Broking.
“LIC 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,” Motilal Oswal Financial Services said in a result update.
The brokerage firm expects LIC to deliver healthy APE growth, coupled with a rising VNB margin trajectory, due to a more optimal product mix. However, operating RoEV should remain modest due to a lower margin profile than its private peers. LIC’s valuation, at 0.6x FY24E EV, appears reasonable considering the gradual recovery in margin and diversification in the business mix, the brokerage firm said.
LIC is trading 28 per cent below its issue price of Rs 949 per share. It had hit a record low of Rs 588 on October 21, 2022. The company has made stock market debut on May 17, 2022.
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