LIC surges as Macquarie analyst Suresh Ganapathy upgrades stock

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26 Aug, 2025 12:21

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Shares of Life Insurance Corporation of India (LIC) gained more than 3 percent on August 16 after Macquarie Capital Securities’ analyst Suresh Ganapathy upgraded the stock following its June quarter earnings.

Macquarie upgraded the stock to "outperform" from "neutral", arguing that cheap valuations of the scrip drove the upgrade. The brokerage firm, however, sees less upside in the stock than before as it cut its price target by 15 percent to Rs 850 to account for discount valuation because of the company’s government ownership.

Brokerage firm Macquarie said that enhanced disclosures made by the life insurance giant for 2021-22 also helped in the upward revision in the value of new business (VNB) and embedded value forecasts made by it.

The embedded value represents the corporate value of a life insurer that is important to understand what its shareholders will get if the firm were to be sold.

LIC’s June quarter performance was underwhelming, as net profit slumped 71.2 percent on-quarter to Rs 2,371.6 crore, while standalone total premium contracted 31.6 percent to Rs 98,351.8 crore.

The company’s market share in first-year premium income stood at 65.42 percent at the end of the June quarter, down from 67.52 percent in the year-ago quarter.

The country’s largest life insurer saw its value of new business margin decline to 13.6 percent from 15.1 percent in the March quarter. LIC alluded to the change in product mix during the quarter as the main reason for the sequential decline in VNB margins.

Value of new business, a key metric of profitability, represents the additional earnings that will be generated from selling an insurance policy during a particular period.

LIC’s Chairman MR Kumar told analysts in a post-earnings conference call that the fall in the new business margin in the June quarter is a "temporary blip" and the value of new business margin will improve once the life insurer increases the share of high margin protection plans.

At 11.26 am, shares of Life Insurance Corporation were up 3 percent at Rs 703 on the National Stock Exchange.

Shares of LIC have fallen 25 percent from their listing in May, though they have rebound 8 percent since hitting the 52-week low of Rs 650 on June 20.Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.