Hold Life Insurance Corporation of India; target of Rs 750: Emkay Global Financial

Emkay Global Financial's research report on Life Insurance Corporation of India

For H1FY23, LIC reported a mixed performance, where 36.7% YoY APE growth (Retail APE: 20.7% YoY and Group APE: 67.5% YoY) and VNB margin of 14.6% were better than our estimates, but the EV of Rs5.44trn was 3% below our estimates and largely flat (+0.85%YoY and +0.5% in H1FY23). PAT at Rs166bn was way above our estimates, as the company chose to transfer surplus Rs143bn from its non-par fund to shareholders’ fund. On net basis, LIC’s H1FY23 numbers do not change our opinion on the fundamental challenges of slower growth and sticky cost leading to gradual market share loss in the retail segment and subpar profitability reflecting in poor Embedded Value (shareholder value) compounding. To reflect H1 developments, we adjust our estimates, leading to 6-8% cut in FY23-25E EV estimates. Currently, LIC is trading on FY23E P/EV of 0.7x. LIC’s valuation is undemanding, but we do not see catalysts to drive a material re-rating of LIC’s shares.

Outlook

We reiterate our Hold rating on the stock with our revised TP of Rs750 (unchanged Sep-23E P/EV of 0.8x).

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