NEW DELHI: Post ‘s business update for FY22, Securities said the stock’s valuation at 0.7 times FY24 embedded value (EV) appears reasonable considering the gradual margin recovery and diversification in the business mix. The brokerage has maintained its ‘buy’ rating on the stock, with a target of Rs 830 per share, valuing the stock at 0.8 times FY24 EV.
At 11.40 am, the scrip was trading at Rs 707.45 on BSE, down 0.66 per cent. Motilal Oswal’s target suggests a 17.32 per cent upside for this stock.
Embedded value stood at Rs 5.41 lakh crore in FY22, which was broadly similar to the last disclosed EV in September 2021 and was 4.7 per cent lower than Motilal’s estimate. EV for FY22 was significantly higher as compared to FY21 levels due to the bifurcation of a single fund into a separate PAR and non-PAR fund, pursuant to changes in the LIC Act in FY22, it noted.
The brokerage said the Value of New Business (VNB) in FY22 was 34 per cent above its estimate of Rs 5,670 crore. VNB margin, it said, at 15.1 per cent in FY22 (against 9.9 per cent in FY21) was significantly ahead of Motilal’s estimate of 10.7 per cent.
“LIC has all the levers in place to maintain its industry-leading position and ramp up growth in highly profitable product segments (mainly Protection and Non-PAR Savings/Annuity). However, changing gears for such a vast organisation requires superior and well-thought execution that also has to endure frequent rotation at the top management level,” Motilal said.
The brokerage estimated LIC to deliver a nearly 10 per cent compounded annual growth rate in NBP over FY22-24 while improving margin trajectory and stability in the capital market will enable improved EV growth going forward, it said.
(Disclaimer: Recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of Economic Times)
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