Buy ICICI Lombard; target of Rs 2400: Motilal Oswal

Motilal Oswal's research report on ICICI Lombard

ICICIGI’s GDP grew 11% YoY in 2QFY25 to INR69b (3% miss). NEP grew 17% YoY to INR50b (3% ahead of our estimates). Claims ratio was largely in line with our estimate at 71.4% (vs. 70.7% in 2QFY24). On a sequential basis, the commission ratio increased ~50bp to 17.5% in 2QFY25 from 15% in 1QFY25 (our est. 17%). The expense ratio increased to 15.6% from 13.3% in 1QFY25 (est. 14%). A higher-than-expected expense ratio led to a miss in the combined ratio at 104.5% (est. 102.5%) compared to 103.9% in 2QFY24. PAT grew 20% YoY to INR6.9b (2% miss). The management expects the momentum in the auto segment to pick up during the festive season and investments in the health business to yield results over the medium term. Combined ratio guidance of 101.5% in 4QFY25 is maintained. We have cut our FY25/FY26 earnings estimates by 4% each on the back of weaker-than-expected performance in 2QFY25. Reiterate BUY with a TP of INR2,400 (based on 36x Sept’26E EPS).

Outlook

We have cut our FY25/FY26 earnings estimates by 4% each on the back of weaker-than-expected performance in 2QFY25. Reiterate BUY with a TP of INR2,400 (based on 36x Sept’26E EPS).