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LIC Shares Rise for Third Day in a Row; What Should Investors Expect Next?


LIC Share Price Today: Life Insurance Corporation (LIC) shares opened upside for the third day in a row and surged on to hit an intraday high of Rs 678.80 apiece levels, logging around 2 per cent rise on Wednesday morning from its yesterday’s close of Rs 665.20 per share. This comes after the LIC scrip hit a fresh all-time low of Rs 650 per equity share on the NSE on Friday.

According to stock market experts, such a rise in LIC shares should be treated as a mere bounce back that might have emerged due to short covering. They said that LIC shares have been nosediving ahead of the end of the lock-in period for anchor investors. They went on to add that the fundamentals of the stock are still weak and one should avoid taking a fresh position in the Life Insurance stock till it gives a breakout.

JPMorgan has initiated coverage on the LIC stock with an overweight stance and target price of Rs 840. “Thesis centers on LIC’s 0.75 times price to embedded value – a measure of market value of an insurer’s current and future policies,” the global brokerage said.

“LIC’s new business value is only 1 per cent of its policies in force. Therefore, with 99 per cent of value from old policies, we see 0.75x P/EV as unduly harsh, even assuming no growth. In reality, LIC has picked up growth recently,” JPMorgan said.

It has forecasted a growth of 6 per cent in FY22-24 for the public sector insurer.

“LIC logged a 44 per cent market share in FY22 but has lost market share to peers over the last five years, JPMorgan said in its report. LIC’s retail premium is growing faster than the industry and is above the 2019 level. LIC is focused on addressing portfolio white spaces. It is making a distribution push as well in agency and other channels, opening upside risk,” mentioned the report. LIC worked primarily in national interest earlier. Its surplus was entirely distributed to policyholders and the government. Regulatory change now ensures LIC retains more profit,” said JPMorgan.

In early June, brokerage Emkay Global Financial Services initiated coverage on the stock with a ‘hold’ rating with a target price of Rs 875-up around 8 per cent from those levels.

“Without this bifurcation exercise, LIC’s H1FY22 EV would have been Rs 1.25 trillion, instead of Rs 5.4 lakh crore. Further, a very significant portion of this EV is sitting in the form of mark-to-market (MTM) gains in equity investments backing the non-par liabilities, taking EV sensitivity to equity market fluctuations to a substantially higher level,” Emkay added.

Naveen Kulkarni, Chief Investment Officer, Axis Securities, said: “The sharp correction in LIC, owing to the weak market sentiments and selling post the end of the anchor investor lock-in period, has made valuations attractive. Changes in the product mix with a focus on increasing the share of non-par products, and improving margins and overall profitability should drive valuations for LIC. Investors can hold on to the stock from a medium-long term perspective.”

 The views and investment tips by experts in this report are their own and not those of the website or its management. Users are advised to check with certified experts before taking any investment decisions.

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