'Deeply discounted valuation': LIC shares a buy? ICICI Securities answers
ICICI Securities: On Thursday, LIC closed at Rs 777.90, up 1.83 percent. The stock is down 13 percent in 2025 so far and 25 percent in the past year.
- Feb 20, 2025,
- Updated Feb 20, 2025 6:33 PM IST
ICICI Securities in its latest note on Life Insurance Corporation of India (LIC) said the life insurance company can witness a product mix-driven rise in value of new business (VNB) margin, but that prospect is being underappreciated by the market.
The domestic brokerage said further improvement in VNB margin and tailwinds in investment returns could lead to a positive surprise ahead. Possibility of Covid-like events, which impact distribution partners, investment portfolio and increase in death claims pose downside risks, it said.
On Thursday, LIC closed at Rs 777.90, up 1.83 per cent. The stock is down 13 per cent in 2025 so far and 25 per cent in the past one year.
The domestic the LIC management remained confident of growth in both par and non-par businesses and is looking at recovery in persistency via internal measures. ICICI Securities suggested a 'Buy' and a revised target of Rs 1,040 on the stock.
"Deeply discounted valuation (near 0.5 times P/EV basis FY27 factoring no economic variance between FY25-27) is unwarranted. Near term risk includes any protracted weakness in overall volumes as agents adjust to revised commission structure under higher surrender charge regime (14.4 per cent growth in weighted individual APE in H1FY25 but only 3 per cent growth in 10MFY25)," ICICI Securities said.
The brokerage values LIC at 0.7 times FY27 EV of Rs 9.4 lakh crore. It reduced its multiple to adequately reflect the risk of EV sensitivity to the market movement and a lower core RoEV profile on a high base.
LIC's strategy remains to grow profitable market share. Its margin improvement with product mix has been strong. ICICI Securities said the strategic initiatives have tracked well consistently in terms of pushing its product mix towards non participating (28 per cent of individual APE in 9MFY25 against 18 per cent in FY24 and 9 per cent in FY23) and revision in product strategy to maximise value for all stakeholders with changes like hike in surrender value.
"There is expansion in non-agency distribution channels (5.3 per cent of individual NBP in 9MFY25 against 3.9 per cent/4 per cent in FY23/24), focus on agency (total number of agents stands at 1.4mn as of Dec’24, 3.3 per cent YoY growth) and improvement in digital initiatives (DIVE/Jeevan Samarth). We believe product mix-driven possible rise in VNB margin is achievable and underappreciated by the market," it said.
ICICI Securities in its latest note on Life Insurance Corporation of India (LIC) said the life insurance company can witness a product mix-driven rise in value of new business (VNB) margin, but that prospect is being underappreciated by the market.
The domestic brokerage said further improvement in VNB margin and tailwinds in investment returns could lead to a positive surprise ahead. Possibility of Covid-like events, which impact distribution partners, investment portfolio and increase in death claims pose downside risks, it said.
On Thursday, LIC closed at Rs 777.90, up 1.83 per cent. The stock is down 13 per cent in 2025 so far and 25 per cent in the past one year.
The domestic the LIC management remained confident of growth in both par and non-par businesses and is looking at recovery in persistency via internal measures. ICICI Securities suggested a 'Buy' and a revised target of Rs 1,040 on the stock.
"Deeply discounted valuation (near 0.5 times P/EV basis FY27 factoring no economic variance between FY25-27) is unwarranted. Near term risk includes any protracted weakness in overall volumes as agents adjust to revised commission structure under higher surrender charge regime (14.4 per cent growth in weighted individual APE in H1FY25 but only 3 per cent growth in 10MFY25)," ICICI Securities said.
The brokerage values LIC at 0.7 times FY27 EV of Rs 9.4 lakh crore. It reduced its multiple to adequately reflect the risk of EV sensitivity to the market movement and a lower core RoEV profile on a high base.
LIC's strategy remains to grow profitable market share. Its margin improvement with product mix has been strong. ICICI Securities said the strategic initiatives have tracked well consistently in terms of pushing its product mix towards non participating (28 per cent of individual APE in 9MFY25 against 18 per cent in FY24 and 9 per cent in FY23) and revision in product strategy to maximise value for all stakeholders with changes like hike in surrender value.
"There is expansion in non-agency distribution channels (5.3 per cent of individual NBP in 9MFY25 against 3.9 per cent/4 per cent in FY23/24), focus on agency (total number of agents stands at 1.4mn as of Dec’24, 3.3 per cent YoY growth) and improvement in digital initiatives (DIVE/Jeevan Samarth). We believe product mix-driven possible rise in VNB margin is achievable and underappreciated by the market," it said.