Broker’s call: LIC (Buy)

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Target: 830 rupees

CMP: INR 604.05

LIC reported PAT of Rs 13,430 crore in Q4FY23, up 4x YoY. This was as a result of the transfer of Rs.7,300 crore from the non-nominal segment to shareholders’ account related to the accumulation of available solvency margin in Q4FY13. For FY23, PAT grew 8 times year-on-year to Rs.36,400 crore.

APE grew by 12 per cent YoY (55 per cent QoQ) to Rs.19,130 ​​crore in Q4FY23 (Rs.56,680 crore in FY23).

Q4-FY23 VNB was at Rs.3,700 crore with VNB margin increasing by 476 basis points quarter-on-quarter to 19.4%. For FY23, VNB margin improved to 16.2% versus 15.1% in FY22.

LICI has the levers to maintain an industry leading position and drive growth in highly profitable product segments (mainly protected, unprotected and annuity savings). However, changing gears for such a massive organization required superior and thoughtful execution.

We expect LIC to achieve a compound annual growth rate of 15 percent in APE during fiscal year 23-25, enabling a compound annual growth rate of 27 percent. However, we expect operational RoEV to remain modest at 10.9 percent, given lower profit margin compared to private-sector peers and a large EV base.

LIC is trading at 0.6x FY24E EV, which seems reasonable given the gradual recovery in margin and diversification in the business mix. We maintain our Buy rating with a TP of Rs 830 (0.8x Sep’24E EV)