Morgan Stanley ups ICICI Bank target on insurance arm valuations

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26 Aug, 2025 12:21

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Moneycontrol Bureau

Morgan Stanley raised its price target for ICICI Bank by 4 percent to Rs 266 (from Rs 255 earlier) owing to higher valuations for the life insurance subsidiary ICICI Prudential. It has maintained equal-weight rating on the stock.

The brokerage house is now valuing ICICI Prudential at Rs 52,300 crore, implying Rs 48 per share for ICICI Bank in SOTP (sum-of-the-parts) valuation against Rs 37 earlier.

"Valuation for ICICI Prudential Life at Rs 52,300 crore has increased by 24 percent (from Rs 42,000 crore earlier). This is mainly led by lowered cost of equity, reflecting a 50bp cut in risk-free rate assumptions to 6.75 percent, following the decline in government bond yields (apart from roll forward). Consequently, valuation multiple has moved higher from around 2.4x September-18 enterprise value (EV) earlier to around 2.9x December-18 EV," Morgan Stanley says in its research report.

Earlier this week, the brokerage house initiated coverage on ICICI Prudential Life Insurance with an overweight rating and price target of Rs 365/share. It believes that ICICI Prudential will see a multi-year improvement in profitability in the base case scenario.

It estimated around 40 percent VNB (value of new business) CAGR for ICICI Prudential during FY16-19 helped by strong premium growth with good distribution franchise and improving macro as key drivers; significant improvement in VNB margins led by strong growth in protection premiums, improving persistency and higher cost efficiencies.

Valuations are not cheap for ICICI Prudential, and should remain so given its superior operational metrics, low balance sheet risk and high capital, it feels.

Morgan Stanley says ICICI Bank shares will be volatile depending on news flow around corporate stress. To become more constructive on the stock, the bank should show big recoveries on existing non-performing loans or improvement in core pre-provision operating profit margins.The country's largest private sector lender will announce its September quarter earnings on November 7.In the quarter ended June 2016, its asset quality weakened further as net non-performing assets rose to 3.35 percent from Rs 2.98 percent on sequential basis following spike in slippages.

At 11:57 hours IST, the stock was quoting at Rs 272.25, up Rs 0.40, or 0.15 percent on the BSE.Posted by Sunil Shankar Matkar