Does LIC's multifold jump in Q4 profit make it a buy? What brokerages say

After Life Insurance Corporation of India (LIC) posted a standalone net profit of Rs 13,428 crore in Q4 FY23 on Wednesday, a number of top brokerages retained their bullish views on the stock.

While Motilal Oswal maintained a ‘Buy’ rating on the stock, Emkay recommended a ‘Hold’. Meanwhile, Axis Capital and JM Financial also maintained ‘Buy’ calls on the counter.

Insurance behemoth LIC on Wednesday reported a standalone net profit of Rs 13,428 crore for the quarter ended in March. The profit grew 466% from Rs 2,371 crore in the same quarter of last year.

However, its net premium income fell 8% to Rs 1.31 lakh crore during the March quarter, compared with Rs 1.43 lakh crore in the corresponding quarter of the previous year.

LIC's first-year premium during the reporting quarter stood at Rs 12,811 crore, down 12% from Rs 14,614 crore in the year-ago quarter. Income from investments rose marginally to Rs 67,846 crore for the January-March period versus Rs 67,498 crore in the same period last year.

Net commission during the quarter rose 5% to Rs 8,428 crore. The same stood at Rs 7,996 crore in the previous year's period. For the full year, the insurer's profit declined 10% to Rs 36,397 crore as against Rs 40,431 crore reported in fiscal 2022.

At 11.04 am, LIC shares were trading 0.5% higher at Rs 607 on BSE.

Should you buy, sell or hold LIC's stock? Here's what analysts say:

JM Financial
Brokerage JM Financial maintained a Buy rating on LIC with a target price of Rs 940, which shows an upside potential of 55% from the current market price of Rs 607.

"We expect growth to be strong going ahead, aided by a large customer base, huge agency network, strong brand equity and importantly, the sovereign guarantee (on sum assured and bonuses) attached to LIC policies; these advantages, along with strong expected tailwinds for the sector, should drive LIC’s overall APE growth to 10-11% over FY24-25E," it said.

Axis Capital
Domestic brokerage Axis Capital reiterated its Buy rating on LIC with a target price of Rs 720, which shows an upside of 19% from the current market price.

"FY23 APE growth of 12.5% remains steady, however, NPAR grew robust (36% YoY) and contributed ~9% of APE in FY23. VNB grew well and VNB Margin expanded to 16.2%. The focus remains on profitable growth driven by the NPAR, annuity and group businesses. We marginally adjust APE estimates on lower growth, offset by better VNB margins, maintain TP at Rs 720 (0.7x Sep’24E P/EV), and reiterate BUY on inexpensive valuation," it said.

Emkay
Emkay reiterated its Hold rating on LIC with a target price of Rs 660, which shows an upside of 9% from the current market prices.

"LIC reported APE growth of 12.5% YoY to Rs 567 billion and VNB growth of 20.7% YoY to Rs 92 billion for FY23, coming in ~3% below our estimates. Factoring in the Q4/FY23 developments, we have tweaked our FY24-25 estimates and introduced FY26 estimates leading to 4-6% changes in APE and VNB. We maintain that growth and cost challenges would result in inferior value creation. Given the undemanding FY24E P/EV of 0.6x, we maintain our Hold rating on the stock," it said.

Motilal Oswal
Motilal Oswal maintained its Buy rating on LIC with a target price of Rs 830, which implies an upside potential of 37% from the current market prices.

"We slightly raised our FY24/FY25 VNB estimates by 4%/6%. We estimate LIC to deliver a 15% CAGR in APE over FY23-25, thus enabling a 27% VNB CAGR," Motilal said.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of the Economic Times)