LIC stock in focus; analysts increase target price

Shares of Life Insurance Corporation of India (LIC) have been on the rise, gaining nearly 25 per cent in the last 15 days. On Wednesday the stock was trading at ₹747.90 on the NSE, up 4.74 per cent (after hitting high of ₹750.80) on a slew of positive news, apart from its financial performance. The stock hit a 52-week high of ₹754.25 on December 20, 2022.

According to S&P Global Market Intelligence, LIC is the fourth largest insurer in the world, after Allianz SE, China Life Insurance Company and Nippon Life Insurance Company.

Marketmen have welcomed its recent launch of Jeevan Utsav.

Besides, the sharp rally in Adani group stocks also bode well for the public sector insurer, as it holds significant stake in those firms. Also, the general rally behind PSU stocks, following a significant win by the ruling BJP in the recent assembly elections, has helped LIC.

Post Q2 results, the brokerages, too, hiked price targets, while turning bullish. LIC recently posted a net profit of ₹17,469 crore in H1 FY24, the highest ever half-yearly profit.

Noting the positive outlook, brokerages have increased the target prices of the stock.

Geojit Financials said with the gradual rise in domestic household savings, the share of life insurance in incremental household financial saving is expected to increase steadily. Adding that the company is positioned to benefit in the long-term, the brokerage firm said, “With an optimistic outlook, we reiterate our Buy rating on the stock, with a revised target price of ₹823, based on 0.65x FY25E EV per share.”

Emkay Global said the company is in a comfortable position to enhance its dividend distribution due to its strong solvency ratio of 190 per cent and solid surplus creation, amid relatively slower growth. It had increased the target price of the stock to ₹850 from the earlier ₹760.

The company reported that its value of new business (VNB) declined by 10.1 per cent year-on-year (y-o-y) in H1 FY24, while its VNB margin was stable at 14.6 per cent. In this regard, Geojit emphasised “the positive impact of the increasing share of the non-par business (+230bps y-o-y) and the favourable change in assumptions (+190 bps y-o-y) was nullified by the negative impact of competitive product pricing.”

“Even after the recent upmove in LIC shares, we maintain that our valuation remains attractive and prices-in structural challenges as well as any technical overhang around a likely stake-sale by the promoter,” Emkay added.

The brokerage firm further said a large part of equity investments in the non-par book are excess investments over the liabilities and will hence not cause any meaningful ALM risk/ volatility in the Available Solvency Margin, albeit will lead to EV volatility.

Despite the sharp run, the LIC stock is still ruling significantly lower to its IPO price of ₹949.

Shiju Koothupalakkal, Technical Research Analyst at Prabhudas Lilladher, said the stock has witnessed a significant recovery from the important 200 period MA of 605 zone, to move past resistance at 690 levels, further strengthening the bias for a further rise in the coming days.

“The next hurdle is visible near the 755-758 zone of the previous peak, where it can find some resistance and probably some correction. Once the 755-760 zone is conquered, we expect further upside movement for higher targets of 790 and 830 levels in the medium term. As of now, with strong support maintained near the 690 zone, one can hold on to the long position,” Koothupalakkal added.