Stocks To Buy: Large-cap Insurance Company PAT Grew By 447.5% In Q4, Stock Can Grow 21%

Geojit Financial Services has given a "buy" call on LIC shares with a target price of Rs 727 per share. The brokerage firm believes that LIC shares are undervalued and have the potential to appreciate in the long term.

Recently the largest insurance company posted a robust growth of 447.5% YoY. PAT came in at Rs. 13,191cr in Q4FY23 (vs. Rs. 2,409cr in Q4FY22), driven by gains on transfer from the policyholders' account.

LIC's annualized premium equivalent (APE) grew 12.5% YoY to Rs. 56,682cr, led by robust 21.6% YoY growth in group business and 6.6% YoY growth in individual par products. Value of New Business (VNB) grew 16.5% YoY and margin expanded 110bps YoY to 16.2%.

Based on the quarterly numbers of the company, Geojit Financial Services, evaluated its stock and believes it would rally by roughly 21%. Geojit Financial Services has cited the following reasons for its bullish view on LIC shares:

LIC's strong financial performance:
LIC has been consistently profitable in recent years and has a strong balance sheet.

LIC's expense ratio:
In FY23, the death claim settlement ratio declined 20bps YoY to 98.5%. The expense ratio stood at 15.5% (vs. 14.5% in FY22).

High solvency ratio:
The strong solvency ratio of 187% in FY23 (vs. 185% in FY22), well above the regulatory requirement of 150%. In terms of premium, the 13th/61st-month persistency ratio stood at 77.1%/61.8% in FY23 (vs. 75.6%/61.0% in FY22).

LIC's large market share:
LIC is the largest life insurance company in India, with the largest market share. By the end of FY23, there were 13.5 lakh agents (vs. 13.3 lakh agents in FY22). Market share by agent workforce stood at 51.3%, as against 54.3% in FY22.

LIC's growth potential with new product launches:
LIC is expected to grow at a faster pace than the industry in the coming years. To support the non-par business strategy, several new non-PAR products have been launched in FY23, namely, Bima Ratna, Dhan Sanchay, Dhan Varsha, New Pension Plus, New Jeevan Amar, New Tech term, and Jeevan Azad.

Valuation & Rating

"The stock is currently trading at attractive valuations, close to its 52-week low price. Hence,
we reiterate our BUY rating on the stock, but with a revised target price of Rs. 727, based on 0.7x FY25E EV per share", adds Geojit.

Stock Price Movement

In the last one year, the share price of this large-cap insurance stock has plunged by 16.65% and since its listing in 2021, it has declined by 31.26%. The current stock price closed at Rs 601.75 per share, it is marginally down by 0.32%.

Disclaimer

The stock has been picked from the brokerage report of Geojit Financial Services. Greynium Information Technologies, the author or the brokerage house will not be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.