Brokerage Bullish on LIC, Pegs An Over 17% Upside: Rationale Explained

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Brokerage Bullish on LIC, Pegs An Over 17% Upside: Rationale Explained

By Malvika Gurung

Investing.com -- Domestic brokerage firm Motilal Oswal (NS: MOFS ) has initiated coverage on the state-owned life insurance giant Life Insurance Corporation (NS: LIFI ), setting a Buy call and a target price of Rs 830/share.

At 10:16 am, the insurer’s shares were trading 2.1% higher at Rs 706.85 apiece, which means the target set by Motilal Oswal is at an upside of 17.4%.

The brokerage house sees LIC’s valuation at a reasonable rate, considering gradual margin recovery and diversification in the business mix despite a ​​high sensitivity to the volatility in markets. 

Thanks to its strong brand value, wide distribution and superior connection with customers, the life insurer continues to maintain its market leadership position despite the sector being flooded with a large number of strong private player competitors.

LIC enjoys a high market share in the Annuity segment, which has helped it to report a high VNB margin of 118% in the Non-PAR segment, showcasing an immense growth potential, the brokerage added. 

However, private players in the life insurance segment are climbing up the ladder at a quick pace, having reported a CAGR of 23-131% over FY19-22.

The brokerage expects a 10% CAGR in new business profit (NBP) during FY22-24E and an improvement in the margin of VNB to 13.6% on a better product mix and higher profit retention.

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