Buy This Recently Listed Major Insurance Stock For Strong 20% Potential Gains: Geojit – Goodreturns

Geojit, a renowned brokerage firm, in its recently published report has given a buy call to Life Insurance Corporation Of India (LIC) the stock of the company for a target price of Rs 810 apiece. Considering the estimated target price by the brokerage, the stock could surge 20% if the stock of the company is purchased at the current market price.
LIC reported multifold growth in profits on the back of growth in premiums, and changes in surplus distribution policy. Focus ahead on growth via channel expansion and sales of products with high VNB margin bode well for the long-term.

Stock Outlook

Stock Outlook

On NSE, the Current Market Price (CMP) of LIC is Rs 678.85 apiece. The 52-week low level of the stock is Rs 650 apiece recorded in June 2022, and the 52-week high is Rs 918.95 apiece recorded in May 2022.

Returns on investment

Returns on investment

The stock was listed on 17 May 2022. The stock over the week has fallen roughly 1.04%. In the past 1 month, it gained roughly 0.52%. Whereas, in the past 3 months, it has fallen 16.36%, respectively. The stock has given a negative return of 22.44% since it was listed on the stock.

 PAT grows multifold as growth rebounds on YoY basis
 

PAT grows multifold as growth rebounds on YoY basis

In Q1FY23, LIC’s gross premium income (GPI) grew 19.9% YoY to Rs. 98,941cr, mainly driven by strong growth in first-year premium (+45.8% YoY to Rs. 7,476cr), single premium (+32.5% to Rs. 40,935cr) and renewal premium (+8.8% YoY to Rs. 50,530cr). Incurred claims grew 5.7% YoY to Rs. 69,134cr, though the claims-settlement ratio declined 206bps to 91.51%. Annualised Premium Equivalent (APE) product mix stood at 57.9%, 4.9%, and 37.2% for Individual par, Individual non-par and Group policies, respectively. The company’s reported PAT for the quarter surged multifold to Rs. 603cr (as against Rs. 24cr in Q1FY22), partly benefiting from higher contribution from shareholders’ account due to changes in surplus distribution policy.

Key highlights

Key highlights

  • The company’s gross value of new business (VNB) during the quarter stood at Rs. 1,861cr, while VNB margin declined to 13.6% (vs. 15.1% as at FY22-end) owing to increase in annuities and changes in product mix.
  • Solvency ratio improved marginally to 188% (vs. 185% as of March 31, 2022).
  • Agency recruitment seen picking up pace with the total number of agents growing 0.5% QoQ to 13,32,782.

 New product launches and digitalisation to aid growth

New product launches and digitalisation to aid growth

LIC’s AUM grew 7.6% sequentially to Rs. 41.02 lakh crores (vs. 38.13 lakh crores). The company has launched two new products – Dhan Sanchay and Bima Ratna, the latter being a channel-specific product only for bancassurance. The company has also tied up with Policy Bazaar and had a soft launch on their website recently, aiming to further policy sales through online channels. The company’s Ananda app, launched during COVID-19 to aid agents to do business without face-to-face interactions, is now integrated with WhatsApp, and has brought down time to policy conclusion to less than 8 minutes.

Initiating coverage on the insurance behemoth, buy for a target price of Rs 810

Initiating coverage on the insurance behemoth, buy for a target price of Rs 810

LIC saw a recovery in its market share in the quarter gone by, and will continue to maintain its dominant position in the life insurance domain for a very long time. Strong goodwill among the general public, government backing, and the robust investment portfolio remain favourable factors and ensure the company will continue to perform well in the long term. Though we may see a marginal slowdown in the new business margin growth in the near term, the company’s focus on increasing the contribution from high VNB margin products bodes well for its long-term performance. With an optimistic outlook, we assign a BUY rating on the stock with a target price of Rs. 810, based on 0.8x FY24E EV per share.

About - Life Insurance Corporation Of India

About – Life Insurance Corporation Of India

Founded and majority owned by the Government of India, Life Insurance of Corporation of India Limited is the country’s leading statutory insurance and investment corporation, with assets under management (AUM) of over Rs. 41 lakh crore and investments in more than 280 listed companies. It started its operations as a corporate firm in September 1956 after the Life Insurance of India Act was passed by India’s Parliament in June 1956. It is one of the largest financial institutions in India. It has an asset value of over 2,529,390 crores. The headquarters of LIC is in Mumbai, Maharashtra.

Disclaimer

Disclaimer

The stock has been picked from the brokerage report of Geojit. 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 making any investment decision.

On NSE, the Current Market Price (CMP) of LIC is Rs 678.85 apiece. The 52-week low level of the stock is Rs 650 apiece recorded in June 2022, and the 52-week high is Rs 918.95 apiece recorded in May 2022.
The stock was listed on 17 May 2022. The stock over the week has fallen roughly 1.04%. In the past 1 month, it gained roughly 0.52%. Whereas, in the past 3 months, it has fallen 16.36%, respectively. The stock has given a negative return of 22.44% since it was listed on the stock.
In Q1FY23, LIC’s gross premium income (GPI) grew 19.9% YoY to Rs. 98,941cr, mainly driven by strong growth in first-year premium (+45.8% YoY to Rs. 7,476cr), single premium (+32.5% to Rs. 40,935cr) and renewal premium (+8.8% YoY to Rs. 50,530cr). Incurred claims grew 5.7% YoY to Rs. 69,134cr, though the claims-settlement ratio declined 206bps to 91.51%. Annualised Premium Equivalent (APE) product mix stood at 57.9%, 4.9%, and 37.2% for Individual par, Individual non-par and Group policies, respectively. The company’s reported PAT for the quarter surged multifold to Rs. 603cr (as against Rs. 24cr in Q1FY22), partly benefiting from higher contribution from shareholders’ account due to changes in surplus distribution policy.
LIC’s AUM grew 7.6% sequentially to Rs. 41.02 lakh crores (vs. 38.13 lakh crores). The company has launched two new products – Dhan Sanchay and Bima Ratna, the latter being a channel-specific product only for bancassurance. The company has also tied up with Policy Bazaar and had a soft launch on their website recently, aiming to further policy sales through online channels. The company’s Ananda app, launched during COVID-19 to aid agents to do business without face-to-face interactions, is now integrated with WhatsApp, and has brought down time to policy conclusion to less than 8 minutes.
LIC saw a recovery in its market share in the quarter gone by, and will continue to maintain its dominant position in the life insurance domain for a very long time. Strong goodwill among the general public, government backing, and the robust investment portfolio remain favourable factors and ensure the company will continue to perform well in the long term. Though we may see a marginal slowdown in the new business margin growth in the near term, the company’s focus on increasing the contribution from high VNB margin products bodes well for its long-term performance. With an optimistic outlook, we assign a BUY rating on the stock with a target price of Rs. 810, based on 0.8x FY24E EV per share.
Founded and majority owned by the Government of India, Life Insurance of Corporation of India Limited is the country’s leading statutory insurance and investment corporation, with assets under management (AUM) of over Rs. 41 lakh crore and investments in more than 280 listed companies. It started its operations as a corporate firm in September 1956 after the Life Insurance of India Act was passed by India’s Parliament in June 1956. It is one of the largest financial institutions in India. It has an asset value of over 2,529,390 crores. The headquarters of LIC is in Mumbai, Maharashtra.
The stock has been picked from the brokerage report of Geojit. 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 making any investment decision.

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