Jefferies retains ‘buy’ on ICICI Pru with 17% upside, sets target price at Rs 640

Jefferies

Global brokerage house Jefferies has retained its ‘buy’ rating on ICICI Prudential Life Insurance with a target price of Rs 640, indicating a potential upside of 17 percent from the current market price of Rs 563, according to an equity research report released today.

“The experience of the new CEO, Bagchi, as ICICI Bank's head of retail banking should benefit ICICI Pru Life. We see growth improving, with scope for valuation to rerate. We raise estimates slightly. Maintain 'buy' with new price target (PT) of Rs 640,” the report said.

According to Jefferies, a combination of an expansion of the distribution network along with initiatives to improve agents' productivity should improve growth.

“We also believe that the experience of the new CEO, Anup Bagchi, as head of ICICI Bank’s retail business, and his previous period at ICICI Securities, position him well to build on understanding across customers and distribution partners,” the report said.

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On the sale through parent ICICI Bank, the report said: “In FY23, ICICI Bank’s contribution to retail annual premium equivalent (APE) fell by 38 percent YoY to 17 percent of retail APE. We see limited downside from here; growth should start improving from 2HFY23 onward. We see 15-16 percent  growth in premiums for the three years from FY24.”

Jefferies believes that a pick-up in growth should help valuations of ICICI Pru to rerate. “In our view, a pick-up in premium growth with sustainable margins around the 31-32 percent mark will be a key re-rating catalyst for IPru Life, which trades at a 15-35 percent discount to leading life insurance companies,” it said.

The firm has, accordingly, upgraded ICICI Pru’s premium growth forecasts. “We upgrade our premium growth for FY24-25 slightly and raise our price target to Rs 640 (from Rs 560) based on 1.9x FY25 P/EV. Buy.”