LIC gets 'outperform' rating on growth headroom, attractive valuations; should you buy? check target prices, expert's view

LIC share price target: Shares of India's biggest Initial Public Offering (IPO), Life Insurance Corporation (LIC) are trading with nearly 30% discount against its issue price of Rs 949 per share. At Rs 684 per share in Wednesday's intraday trade, the counter has gained over five per cent in the past two days after hitting a 52-week low of Rs 650 apiece on June 20.  

LIC stock price has seen an extremely disappointing trend post listing, falling almost 30% from its IPO price, said Punit Patni, Equity Research Analyst, Swastika Investmart Ltd.  

He was of the view that the current correction has priced in the concerns with the company like low VNB margins, losing market share to private players, high reliance on agency channels, etc. Further, the valuation of 0.8 Price to Embedded Value discounts any volatility or reduction in embedded value due to stock market correction, the analyst said.  

"We believe India's highly underpenetrated life insurance market is still in its infancy and is well-positioned to capitalize on the enormous growth potential. LIC has several competitive advantages, including a strong brand value, a massive network of agents, and an enviable distribution network. In short, these levels are the best to accumulate this stock for the long term," added Punit Patni.  

Meanwhile, Bank of America (BoFA) Securities has initiated coverage on the insurance behemoth stock.  

What do brokerages say?  

The global brokerage firm gave an 'outperform' rating on LIC with a target price of Rs 930, which translates into an upside of almost 40% on Tuesday's closing price of Rs 665.30 per share.  

Saying that there is good headroom for growth of the national insurer, BoFA securities was of the view that LIC stock is available at 47-70% discount in comparison to the private players. A global player in its segment, LIC can do outperform going forward due to its widening penetration, it said.  

Brokerage house Goldman Sachs, however, maintained its neutral stance on the stock for target price of Rs 700 per share.  

Earlier, JP Morgan had initiated coverage on the stock with an overweight rating. The brokerage firm had set a target price of Rs 849 per share in one year.  

"We believe the market views LIC as an equity market proxy and recent weakness in markets is overdone. We don’t foresee LIC trading at private sector valuations of 2-3 times P/EV (price to embedded value), but our March-23 price target of Rs 840 is based on 1 times FY23 P/EV, which we think is justified on a mostly par back book, excess assets on the B/S (balance sheet), and a 185% solvency ratio,” the brokerage had said.  

Meanwhile, none of the targets given by these brokerages go past the LIC ipo issue price of Rs 949. At Rs 4.23 lakh crore market on June 22, the insurance giant has eroded around 1.7 lakh market cap already against Rs 6lkah crore when the stock debuted on the exchanges.   

LIC share listing 

Shares of India's biggest IPO had made a tepid debut on the NSE and BSE. The stock of the state-owned insurance firm was listed at Rs 872 apiece on the BSE. On NSE, the shares were listed at Rs 872 apiece.