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LIC stock: What brokerages, analysts expect from the insurance behemoth

LIC stock: What brokerages, analysts expect from the insurance behemoth

JPMorgan has initiated coverage on the LIC stock with an overweight stance and target price of Rs 840.

LIC stock made a tepid market debut on May 17, opening at a discount of 8.62 per cent against the IPO issue price. LIC stock made a tepid market debut on May 17, opening at a discount of 8.62 per cent against the IPO issue price.

Shares of Life Insurance Corporation (LIC) rose in early trade today amid positive broader markets. The stock rose 1.52 per cent or Rs 10.1 intraday to Rs 671.35 on BSE. The market capitalisation of the public sector insurer climbed to Rs 4.14 lakh crore today. A total of 0.41 lakh shares of the firm changed hands amounting to a turnover of Rs 2.72 crore on BSE.

On NSE, the stock was trading 0.84 per cent higher at Rs 666.95. The market capitalisation of the public sector insurer climbed to Rs 4.21 lakh crore. A total of 5.69 lakh shares of the firm changed hands amounting to a turnover of Rs 38.05 crore on NSE.

JPMorgan has initiated coverage on the LIC stock with an overweight stance and target price of Rs 840. "Thesis centers on LIC's 0.75 times price to embedded value - a measure of market value of an insurer's current and future policies," the global brokerage said.

"LIC's new business value is only 1 per cent of its policies in force. Therefore, with 99 per cent of value from old policies, we see 0.75x P/EV as unduly harsh, even assuming no growth. In reality, LIC has picked up growth recently," JPMorgan said.

It has forecasted a growth of 6 per cent in FY22-24 for the public sector insurer.

"However, key risks such as consistent stake reduction, national service by way of products or asset allocation, investment write-offs, premium decline remain," added the brokerage.

"LIC logged a 44 per cent market share in FY22 but has lost market share to peers over the last five years, JPMorgan said in its report. LIC's retail premium is growing faster than the industry and is above the 2019 level. LIC is focused on addressing portfolio white spaces. It is making a distribution push as well in agency and other channels, opening upside risk," mentioned the report. LIC worked primarily in national interest earlier. Its surplus was entirely distributed to policyholders and the government. Regulatory change now ensures LIC retains more profit," said JPMorgan.

In early June, brokerage Emkay Global Financial Services initiated coverage on the stock with a 'hold' rating with a target price of Rs 875-up around 8 per cent from those levels.

LIC's value of new business (VNB) accretion at around 1-1.5 per cent of enterprise value (EV) from FY25 fares poorly with around 8-11 per cent of EV being accrued as value of new business (VoNB) for private sector peers, Emkay said.

In addition, LIC's EV is largely an outcome of par and non-par fund bifurcation exercise undertaken in H1FY22.

"Without this bifurcation exercise, LIC's H1FY22 EV would have been Rs 1.25 trillion, instead of Rs 5.4 lakh crore. Further, a very significant portion of this EV is sitting in the form of mark-to-market (MTM) gains in equity investments backing the non-par liabilities, taking EV sensitivity to equity market fluctuations to a substantially higher level," Emkay added.

Ravi Singh, Vice President and Head of Research, Share India

"LIC stock is witnessing short coverings and made slight gains. However, this is not a trend reversal and investors must wait for consolidation in stock before entering any fresh positions. The high-risk appetite investors may hold their positions. LIC business metrics are good and the stock will give good returns on investment at lower levels. The momentary pullback in LIC can touch the levels of Rs 720 but is staking not sustainable. The stock looks attractive for value buying around Rs 650 - Rs 620 levels only, for long term."

Manoj Dalmia, Founder, and Director, Proficient Equities

"LIC made slight gains, this must be due to some buying happening. But one should not consider this as a trend reversal and buy immediately. Instead, wait for some consolidation to take place, those who have to hold for a longer period may remain to hold as it won't make sense to sell now and book loss. One thing that can be done is to average out more on a consolidation. The future prospects are bright in the long term. Currently, it is suffering some setbacks due to macro scenarios which can be a good opportunity to accumulate in a timely manner."

The stock of the country's largest insurer has lost 22.8 per cent compared to its listing price of Rs 867.20 on BSE. LIC stock made a tepid market debut on May 17, opening at a discount of 8.62 per cent against the IPO issue price. The company offered its stock in a price band of Rs 902- Rs 949. It was listed at Rs 867.20 on BSE. On NSE, the stock was listed at Rs 872, 8.11 per cent lower than the IPO price.