LIC: All levers in place to maintain its industry leading position, says Motilal Oswal; recommends buy for this target

LIC share price: A day after LIC (Life Insurance Corporation) reported Indian Embedded Value (IEV) at Rs 5,41,492 crore as of March 31, 2022, the stock of the India's largest insurer received a buy tag from brokerage firm Motilal Oswal.  

"As on March 31, 2022, the IEV of LIC of India has been determined to be Rs.5,41,492 Crore (Rs.5,414.9 Bn) as compared to Rs.95,605 Crore (Rs.956 Bn) as on March 31, 2021 and Rs.5,39,686 Crore (Rs.5,397 Bn) on September 30, 2021," the company had said in regulatory filing on July 14.  

EV is significantly higher in FY22 as compared to FY21 levels due to the bifurcation of a single fund into a separate PAR and Non-PAR fund, pursuant to changes in the LIC Act in FY22, underlined Motilal Oswal.  

VNB margin which improved to 15.1% in FY22 v/s 9.9% in FY21 was also significantly ahead of its estimate of 10.7% in FY22.  

It believes LIC has all the levers in place to maintain its industry leading position and ramp up growth in highly profitable product segments (mainly Protection and Non-PAR Savings/Annuity). 

However, it feels changing gear for such vast organisation would require well-thought-out execution. "It would also require frequent rotation at the top management level," it said.  

As per Motilal Oswal, LIC can deliver around 10% CAGR IN NBP over FY22-24. Also, improving margin trajectory and stability in the capital market will enable improved EV growth going forward, it says.  

Saying at the current levels, LIC valuations are reasonable, it reiterated its buy call with unchanged target price of Rs 830. On Monday's closing price of Rs 712 per share, it seen an upside of 17% in the counter.  

Meanwhile, the counter rose nearly one and half per cent to Rs 721.45 per share on Friday, and was trading around Rs 708 at 2.50 pm. At a market-cap of 4.484 lakh crore as on July 15, the insurance firm eroded over 1.5 lakh market cap against Rs 6lkah crore when the stock debuted on the exchanges. The stock was trading around 25% discount against the IPO issue price of Rs 949 per share.   

The counter was listed at a discount of 8% to Rs 872 on the National Stock Exchange (NSE) against the issue price.