Two of three brokerages have assigned a ‘buy’ rating on ICICI Lombard General Insurance Company Ltd and expect up to 20 percent upside to the stock in the next 12 months after the insurer posted a healthy premium growth in the second quarter.
ICICI Lombard shares jumped 3.72 percent to touch a high of Rs 1,408.85 in morning deals on BSE a day after the general insurance company posted a 17 percent growth in operating profit at Rs 597.2 crore for the second quarter of FY24 compared to Rs 510.2 crore in the year-ago quarter.
Net profit, however, declined to Rs 577.3 crore in Q2FY24 against Rs 590.5 crore in the year-ago period. The combined ratio, a measure of profitability, was 103.9 percent in Q2 of FY24 compared to 105.1 percent in the year-ago period.
HSBC assigned a ‘buy’ call on ICICI Lombard with a target price of Rs 1,578 per share, implying a potential upside of 17 percent, highlighting healthy premium growth.
The brokerage stated that Q2 showed healthy premium growth and market share gains for the insurer.
An improvement in the combined ratio in the September quarter was also positive, HSBC said in a report.
“A moderation in combined ratio should drive FY23-26 earning per share CAGR higher than top-line growth,” HSBC said while raising the EPS estimate by 2.1-3.6 percent for the FY2024-26 period.
Another brokerage CLSA also assigned a buy call on ICICI Lombard with a target price of Rs 1,640 per share, implying a potential upside of 20 percent.
The brokerage mentioned that the combined operating ratio (COR) of 103.9 percent in Q2 of FY24 was better than its estimate.
The company reported a better COR despite floods and seasonal diseases because of better Motor Book performance, it stated.
The premium growth for the first half of FY24 was 18 percent.
Given the second half is dominated by retail, the brokerage expects this healthy momentum to continue.
CLSA raised the FY24 growth estimate from 15 percent to 17 percent.
Analysts at brokerage Macquarie, however, sounded bearish flagging an uptick in COR compared to the pre-COVID period and higher loss rates in the motor segment.
Macquarie assigned an ‘underperform’ rating on ICICI Lombard with a target price of Rs 995 per share, implying a potential downside of 26 percent.
The brokerage mentioned that ICICI Lombard's COR is now structurally higher at 102 percent against 99-100 percent pre-COVID.
“Higher loss rates in motor and elevated operational expenditure are driving CORs up structurally,” it stated.
“Think valuation at 5.0x FY25 P/BV is expensive given its RoE (return on equity) profile of 20 percent,” the brokerage added.
ICICI Lombard shares were trading 1.48 percent up at Rs 1,378.40 on BSE at 9.42 AM.
(Edited by : Ajay Vaishnav)
