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Should you buy LIC shares post Q1 results?

15 Aug , 2022   By : Kanchan Joshi

Should you buy LIC shares post Q1 results?

Life Insurance Corporation of India (LIC) has all the levers in place to maintain its industry-leading position and ramp up growth in the highly profitable product segments (mainly Protection, Non-PAR, and Savings Annuity). However, changing gears for such a vast organization requires a superior and a well thought out execution, said Motilal Oswal. 

The state-run life insurance behemoth, which went public recently, reported a multifold jump in its June quarter net profit at Rs682.9 crore as compared to Rs2.9 crore in the year-ago period. 

LIC reported a 20% year-on-year (YoY) growth in net premium, led by a 35%/9% growth in the new/renewal business as easing COVID-19 restrictions boosted sales of policies for the insurer that largely depends on its agents. The first-year premium for the reporting quarter came at Rs7,429 crore as against Rs5,088 crore in the year-ago period. 

The company said that when compared with the preceding March quarter, the performance was down across parameters. The company, which drives its business mostly through 1.3 million sales agents, was hit by pandemic-led lockdowns last year that disrupted the work of its agents who focus on in-person engagement.

“We expect LICI to deliver ~13?GR in APE during FY22-24, while VNB margin is likely to improve to 14.6%. However, we estimate operating RoEV to remain modest ~12.4% on a lower margin profile than its private peers. LICI’s valuation, at 0.7x FY24E EV, appears reasonable, considering the gradual recovery in margin and diversification in the business mix," the brokerage said while maintain its Buy rating on LIC shares with an unchanged target price of Rs830.

LIC continuously increased its market share in CY22. It launched two new Non-PAR products in 1QFY23. The management said it will focus on the launch of Non-PAR products only. It also launched a channel-specific product for the first time.

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