Reduce ICICI Lombard; target of Rs 1900: Emkay Global Financial

Emkay Global Financial's research report on ICICI Lombard

ICICIGI reported a mixed Q2FY25 result, where the operating performance at 10.8% YoY GWP growth and the combined ratio at 104.5% came in lower than our estimates; however, buoyant equity market-led capital gains at Rs2.37bn drove PAT to Rs6.9bn, which is 8.5% above our estimates. The management remains committed to its profitable growth strategy by targeting selected business and customer segments. The growth outlook looks challenging for the General Insurance sector due to factors such as no hike in Motor TP, muted new PV sales growth, and competitive pricing environment in Group Health and Commercial Lines. The profitability environment is also likely to remain tough as the competitive intensity in distributor’s payout stays high.

Outlook

To reflect the Q2 and external developments, we have adjusted our FY25-27 estimates leading to a slight increase in CoR, minor reduction in GWP, and ~3% cut in FY26-27E EPS (FY25E EPS increases by ~4% on higher capital gains). We reiterate our REDUCE rating on the stock with an unchanged Sep-25E TP of Rs1,900.

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