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“Even after the recent upmove in LIC shares, we maintain our stance that valuation remains attractive and prices-in the aforementioned structural challenges as well as any technical overhangs around a likely stake-sale by the promoter. Delivering a sustainable operating RoEV of ~10.5% and single-stage growth rate of 5%, we value LIC shares at 0.7x Sep-25 P/EV, with our new Sep-24E target price of Rs850/share (Rs760 earlier),” Emkay said.
LIC shares were trading marginally higher at Rs 679.55 on BSE today and have lost about 4% of its value on a year-to-date basis.
Last week’s rally appeared to be largely driven by a highly attractive valuation, which is already more than pricing-in the structural challenges of market-share loss and bloated cost structure.
“The challenges of the slower growth-led market-share loss to private players and the higher commission-/employee expenses-driven bloated cost structure are here to stay, but their impact is likely to be less pronounced than that’s seen in recent years,” Avinash Singh of Emkay said.
With strong Solvency of 190% and healthy surplus generation amid relatively slower growth, LIC is now in a comfortable position to materially increase its dividend payout.
A part of the optimism around LIC shares last week also came on the backdrop of LIC Chairman Siddhartha Mohanty’s comments that the state-run insurer was projecting a double-digit growth in the current financial year and also has plans to launch assured return products to increase market share.”In this product, after premium paying term and policy term, one will get 10% of the sum assured every year for the rest of his or her life. This is a guaranteed non-par product. We will launch the product next month,” LIC chairman Siddhartha Mohanty had told ET last week.
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(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
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