LIC share price may give 25% return in long term, says Yes Securities
2 min read 13 Feb 2023, 02:20 PM ISTLIC share price may bounce back and go up to ₹770 apiece levels in long term, believes Yes Securities
PremiumShares of Life Insurance Corporation (LIC) of India today hit new low of ₹605.10 apiece on NSE. Extending the sell off triggered after Adani-Hindenburg row, LIC share price today opened lower and went on to hit new life-time low, which is more than 50 per cent below the upper price band of its initial public offering (IPO). However, Yes Securities is highly bullish on the insurance counter. The brokerage believes that LIC share price may go up to ₹770 apiece levels from its current market price, which is ₹605 today.
Highlighting the reason for being bullish on LIC shares, Yes Securities says, "The ULIP product line, which is low-margin, has risen faster than other Non-Par products. Management states that LIC’s market share in ULIP is small and there is more headroom for this product line to grow. However, its impact on margin will be offset by Non-Par Savings (Non-ULIP) and Annuities. It may be noted that there have been 6 new product launches in 9M, all in the Non-ULIP Non-Par segment, barring one. On repricing, Annuity prices had been revised in August, which also impacted margin negatively. The repricing on Annuity products was done to make the product more competitive and growth will more than offset the negative impact on margin."
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The brokerage went on to add that the banca (including alternate) channel has grown 48% YoY and has contributed 3.50% to individual NBP in 9MFY23 compared with 2.56% in 9MFY22. On the other hand, the agency channel has grown 7.6% YoY. Agent count has been flattish over 9M since there have been agent dropouts along with recruitment. Management explained that agents are undergoing training on the new products and they would be back on the street in Feb and Mach with renewed vigour. From a longer-term perspective, LIC sees agent productivity improving significantly over 5 years.
On its suggestion to positional shareholders in regard to LIC shares, Yes Securities said, "We maintain ‘BUY’ rating on LIC with a revised price target of ₹770. We value LIC at 0.7x FY24 P/EV for an FY23E/24E/25ERoEVprofile of 10.7/10.8/10.9%.We prefer IPRU, SBIL and MFS in the life insurance space."
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.
