Life Insurance Corporation of India (LIC) reported a 50 per cent year-on-year profit decline in the September quarter, leading to a drop in the company’s shares in early trade.
While shares of the life insurer recovered, it was still trading in negative territory ahead of today's market closing.
LIC’s net profit fell more than 50 per cent YoY to Rs 7,925 crore in Q2FY24. The net premium income also took a hit, decreasing by nearly 19 per cent YoY to Rs 1.07 lakh crore. Despite this, two brokerages advocated a buy rating on the LIC stock.
Emkay upgraded the stock from a prior hold to buy, while Motilal Oswal reiterated its buy position. Both firms pointed out that the life insurer has robust strategies to uphold its dominant industry position and escalate growth in highly profitable product segments.
It revised its rating from hold to buy and raised the price target to Rs 760 from Rs 680.
In its evaluation, the brokerage said that the post-earnings stock review highlighted a slower growth pattern, a strong equity market-led EV boost, and pension concerns.
Structural issues seem factored in, it stated and indicated that greater surplus generation and slower growth might lead to a dividend increase, given LIC's healthy solvency.
Meanwhile, Motilal Oswal raised its Embedded Value (EV) estimates due to better-than-expected equity market returns and upheld its buy rating with a target price of Rs 850.
The brokerage highlighted LIC's potential to sustain its industry-leading position and enhance growth, mainly in the profitable product segments.
However, the brokerage reduced their (value of new business) VNB estimates due to the decline in VNB margins, emphasising the need for meticulous execution in changing gears for such a significant organisation.
LIC, currently trading at 0.6X FY24E EV, is seen as reasonably priced, considering the evolving business mix and a gradual rebound in margins, it added.
