The dramatic rise in LIC’s share price was seen after a long time, experiencing a robust intraday increase of 9.7% on November 24, hitting a 10-week high of ₹677.65 per and also marking the biggest intraday gain since listing in May 2022.
During the trading session, the stock reached a peak of ₹682 per share. This significant increase came on the heels of LIC’s target of achieving double-digit growth in new business premiums by fiscal year 2024.
Analyst projects 20% up
Analysts expressed optimism about the stock, leading to an upward adjustment of the target price and predicting a more than 20% upside.
Brokerage firm Emkay increased its target price to Rs. 850/share (Rs. 760 earlier, on November 12, 2023), noting that the business is in a comfortable position to substantially improve its dividend distribution due to its strong solvency ratio of 190% and solid surplus creation amid relatively more slow growth
While the brokerage house is aware of the structural difficulties caused by a slower growth loss of market share as well as excessive operating costs, they predict that these will eventually come down.
Maintaining a ‘Buy’ tag on the LIC stock, the brokerage firm said, “Even after the recent rally in LIC shares, we maintain our view that valuation remains attractive and prices-in the aforementioned structural challenges as well as any technical upsides around one.probable investment sale by the promoter.Delivering a sustainable operating RoEV of ~10.5% and a one-phase growth rate of 5%, we value LIC shares at 0.7x Sep-25 P/EV, with our new target price of Sep-24E. ₹850/share (Rs760 earlier).”
The increase witnessed last week seems to have been mainly fueled by an exceptionally attractive valuation. This assessment already includes and reflects the structural challenges related to market share erosion and an inflated cost structure.
“The challenges of the slower growth-led market loss to private players and the higher commission/staff expenses-driven inflated cost structure are here to stay, but their impact is likely to be less pronounced than that seen in recent years, Avinash Singh of Emkay said.
Meanwhile, brokerage firm Geojit Research noted that with a gradual increase in household household savings, the share of life insurance in incremental household financial savings is expected to steadily increase.
“The company continues to diversify its product mix with a focus on strengthening the non-parity portion of products. The life insurance density and the age of penetration continue to be lower in India relative to other developing economies,” the brokerage firm said in his report.
Reiterating a BUY rating, the firm further said, “LIC, as the market leader and a trusted name among the population, is best positioned to benefit in the long term. With an optimistic outlook, we reiterate our BUY rating on the stock with a revised target price of Rs. 823 , based on 0.65x FY25E EV per share.”
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Updated: 29 Nov 2023, 21:20 IST