LIC Stocks See the best intra-day gains: Shares of Life Insurance Corporation of India (LIC) rose a staggering 9 percent to Rs 682 apiece on the BSE in Monday’s opening session, their best intraday percentage gain since listing in May, after the country’s largest insurer an increase in quarterly earnings on Friday.
The country’s largest insurer on Friday reported an independent net profit of Rs 15,952 crore for the quarter ended September, sharply higher than Rs 1,433 crore a year ago. Net inflows for the quarter rose 26.6 percent year-on-year (YoY) to Rs 1.32 lakh crore. Net investment income increased by 10 percent year-on-year to Rs 84,104 crore.
First year inflows rose 11.3 percent year-on-year to Rs 9,125 crore during the quarter. Single premiums rose sharply by 62 percent to Rs 66,901 crore.
The solvency ratio — which measures an insurance company’s cash flow relative to the amount it owes as total life coverage — stood at 1.88 percent on Sept. 30, similar to that at the end of the June quarter.
The company’s gross non-performing assets stood at Rs 26,111 crore on September 30, compared to 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 policies are key drivers of growth in value of new business (VNB) and in turn embedded value (EV). This, in contrast to the strong growth prospects of Indian life insurance (especially through the lens of insured amounts), makes LIC a strong investment proposition. Concerns about the sensitivity of stocks to EV have been overstated and the relative ease of increasing the VNB margin through a change in the mix is undervalued,” said ICICI Securities. The brokerage maintained the Buy rating on LIC stocks with a target price. of Rs 917 each.
“Long term investors should wait for the possible breakout watching Rs 700 levels on the chart pattern. Insurance stocks are expected to show a strong upward move after closing above Rs 700 apiece. Currently, the stock has support at Rs 630 but on breaking this support, LIC shares could rise to Rs 580 levels. Long-term investors are thus advised to wait for the breakout and collapse. They must either buy at Rs 600 apic levels, keeping stop loss below Rs 580 or above Rs 700 levels, keeping stop loss at Rs 630 each,” said Sumeet Bagadia, Executive Director at Choice Broking.
“LIC has all the leverage to maintain its industry leading position and accelerate growth in its highly profitable product segments (primarily Protection, Non-PAR and Savings Annuity). However, switching for such a large organization requires superior and well-thought-out execution,” Motilal Oswal Financial Services said in an update of the results.
The brokerage firm expects LIC to deliver healthy APE growth, coupled with a rising VNB margin trajectory, thanks to a more optimal product mix. However, the operational RoEV should remain modest due to a lower margin profile than its retail competitors. LIC’s valuation, at 0.6x FY24E EV, seems reasonable given the gradual recovery in margin and diversification in the business mix, the brokerage firm said.
LIC is trading 28 percent below the issue price of Rs 949 per share. It had reached a record low of 588 rupees on October 21, 2022. The company made its stock market debut on May 17, 2022.
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