JP Morgan double upgrades LIC to 'overweight'; sees up to 17% potential upside

After the company's earnings last Friday, shares of the largest insurer Life Insurance Corporation of India (LIC) traded on a muted note in the previous session. Since the last one month the stock is trading a range of Rs 900-950 per share.

On Monday, the stock traded on a flat note wih a positive bias at Rs 918.55 apiece.

For the reported September quarter, the company's pofit declined despite strong premium growth as rising policy payouts led the decline. The profit for the period reduced 3.7 per cent on the back of 17 per cent increase in benefit payouts- amounting to Rs 97,562 crore.

Consideing growth to sustain, global brokerage JP Morgan has double upgraded the stock to 'overweight' from the earlier underweight call with the target raised to Rs 1,075 per share from Rs 790 apiece. This implies gains of over 17 per cent from the previous close.

The brokerage has revised VNB or value of new business forecasts for FY25/26 by 9 per cent/11 per cent, respectively, outweighing the negative impact from higher product benefits anf lower bond yields.

LIC Q2 results

The insurer’s net premium income surged 11.5 per cent year-over-year to Rs 1,20,000 crore, driven by rising consumer awareness and the launch of new insurance products. Analysts noted that the post-pandemic environment has fueled demand for life insurance, bolstering premium collections across the industry.

LIC’s solvency ratio, a key indicator of its financial health, strengthened to 198 per cent from 190 per cent a year ago, indicating improved capability to meet long-term obligations. The insurer has been increasing its focus on high-margin non-participating products to enhance profitability.

The net value of new business (VNB), a critical measure of profitability from new policies, climbed 37.7 percent for the half-year ended September, with the VNB margin rising to 16.2 percent, up from 14.6 percent last year. This growth underscores LIC’s strategic shift towards more lucrative product offerings.

LIC share price performance

In the last one year, the stock moved higher by around 51 per cent.