LIC Share Price: Shares of Life Insurance Corporation (LIC) shares fell nearly 1.5 per cent in Monday morning trade after the company declared its Q2 FY24 results on 10 November 2023, post market hours. The topline decreased by 9.2 per cent and the profit decreased by 49.35 per cent YoY. As compared to the previous quarter, the revenue grew by 6.85 per cent and the profit decreased by 16.65 per cent.
The Selling, general & administrative expenses rose by 55.58 per cent sequentially and decreased by 41.47 per cent Y-o-Y. The operating income was down by 12.36 per cent sequentially and decreased by 50.1 per cent Y-o-Y.
The Earning per share came at Rs 12.77 for Q2 FY24, which decreased by 42.51 per cent Y-o-Y.
The value of new business (VNB), the expected profit from new policies, for the six-month period ended September 30, 2023, was Rs 3,304 crore as compared to Rs 3,677 crore in the corresponding period last year. The net VNB margin for the same period remained flat at 14.6 per cent.
LIC Chairperson Siddhartha Mohanty said that the insurer worked on realigning some of its products due to which VNB margins were affected. Additionally, competition and revision in rates affected the margin too, said Dinesh Pant, Executive Director.
LIC went public in May last year when its shares were sold at Rs 949 apiece in India’s largest IPO. The stock has not gone back to its IPO price since listing. The scrip touched an all-time low of Rs 530 in March this year before staging a slight recovery to trade at around Rs 608 level.
Should You Buy?
Analysts at Motilal Oswal are bullish on the stock as they believe that LIC has levers in place to ramp up growth in the highly profitable product segments. “However, changing gears for such a vast organization requires a superior and well-thought-out execution plan,” they said.
The brokerage expects, LIC to deliver a 3 per cent CAGR in annualized premium equivalent (APE) over FY23-25, thus enabling a 9 per cent VNB CAGR. APE is a measure of ascertaining the business sales in the life insurance industry.
However, analysts expect LIC’s operating return on embedded value (RoEV) to remain modest at 10.5 per cent, given its lower margin profile than private peers and a large EV base.
Emkay says that on valuation front LIC is currently trading at ~0.50 times September 2025 estimated Price to EV ratio, with the structural challenges and a possible share sale by the government already in the price. Hence Emkay has upgraded the stock to BUY, as they believe higher surplus generation and slower growth could lead to a step jump in dividend, as solvency is healthy. Also their fair value September 2024 estimated target price is Rs760 per share (offering 25 per cent upside), and they value the shares at 0.63x September-25 EV (Cost of Equity: 13 per cent; Operating Return on Embedded value (RoEV): 10 per cent; Single Stage Growth: 5 per cent).
