Shares of Life Insurance Corporation of India (LIC), which rallied nearly 30% so far this year and were up 80% in the last one year, gained another 4% in Monday's trade. The state-owned insurer posted a strong set of third quarter numbers, delivering 16.6% value of new business (VNB) margin over the first nine months of this fiscal, aided by robust growth in the non-par segment, driven by launch of new products.
If one goes by market analysts, the LIC stock has potential to further rise up to ₹1,300 level in the next one year.
LIC's strategy stays pivoted on the rising share of non-par products in the product mix and on delivering absolute VNB growth, said analysts at brokerage Emkay Global. The LIC management expects annual premium equivalent (APE) growth to improve from hereon, propelled by product launches across categories.
Further, LIC's focus on digital initiatives is likely to drive customer acquisition and customer servicing, Emkay Global said in its latest note.
"To bake-in the Q3FY24 developments, we increase our VNB margin estimate by 1 percentage points and of APE by 3%, which results in 9-11% growth in FY24E-26E VNB. After the stellar run-up in the stock price post our upgrade (57% outperformance vs Nifty), we take a breather and move to 'Add' rating from 'Buy', with our revised Dec-24E target price of ₹1,200 per share (from ₹975 earlier), implying Dec-25E P/EV of 0.9 times," the brokerage noted.
Domestic broking firm Kotak Institutional Equities has raised its target on the LIC stock to ₹1,300 from ₹1,040 per share and also revised its embedded value (EV) estimate by 5.7-6.8%, largely reflecting higher unrealised gains and the recent market rally. Tailwinds to LIC's equity portfolio provide a further upside, Kotak said.
The brokerage also acknowledged that LIC's value remains sensitive to capital market movements, any correction in capital markets can provide a downside to its enterprise value and fair value.
LIC recently overtook State Bank of India (SBI) to become India's most valuable state-run company in terms of market capitalisation. At the start of trading on Monday, LIC had a market capitalisation of ₹6.81 lakh crore, compared to SBI's ₹6.38 lakh crore.
One must note though, that LIC operates on a very low float in the market as the government still holds a 96% stake in the insurance company. The government had divested only a 3.5% stake at the time of its IPO in May 2022, which is to date, the country's largest public issue.
Speaking to CNBC-TV18 on December 18, Deepak Shenoy of CapitalMind said, "LIC is going to be among the top eight most profitable companies in India in the next 2 years and it’s a business that is worth keeping for a longer time and it will get revalue as more information starts to be available."
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