Market leaders are generally one of the best options to add them to a long-term portfolio. If investors are looking to expand their exposure in the life insurance space then Life Insurance Corporation (NS:LIFI) of India Limited should be given a serious look. It is the largest life insurance company in India and the 13th largest listed firm on the NSE, having a market capitalization of INR 3,75,641 crores.
Although the stock has disappointed investors big time since its listing on the Indian bourses, falling from the listing price of INR 872 to an all-time low of INR 530.05, the current 600-odd levels might be a good opportunity for value investors. The company’s Q4 FY23 consolidated net income jumped over 447% YoY to INR 13,190 crores. On a yearly basis, the FY23 profit was recorded at INR 35,996 crores, a whopping 772% YoY Jump.
Image Description: Comparison of performance ratios of LIC from FY22 to FY23
Image Source: LIC Investor presentation
LIC’s asset under management (AUM) also surged to INR 43,97,205 crores, from INR 40,84,833 crores a year ago. Its gross NPAs (non-performing assets) have also seen a reduction from 6.03% to 2.56% in the same period. One of the main reasons for the high profitability was a significant fall of 34.4% YoY in total death claims to INR 23,423 crores, while Covid-19-related claims witnessed a sharp YoY decline of 73.4% to only 560 crores, from INR 2,112 crores in FY22.
As per InvestingPro's proprietary financial models, the fair value of LIC is around INR 706.8, projecting an upside potential of 16%. This is the average of 4 models to arrive at a much more realistic estimate of the fair valuation. In fact, the least intrinsic value that is coming out is INR 558 which is not far from the CMP, giving this stock a high margin of safety.
On the technical front, the stock is looking to pare losses after falling to an all-time low in March 2023 and has already rallied 20% from there. Investors might see some selling pressure around INR 625 which is a selling zone, but these bottom levels do not project much of a downside. In fact, after these stellar earnings details, it's less likely for the stock to break its all-time low for a long time.
Read More: 3 Stocks Paying Dividends Next Week!