Should you buy LIC stock post 50% YoY fall in Q2 profits?

Notwithstanding a 50% year-on-year decline in Life Insurance Corporation of India's (LIC) September quarter net profit, a couple of top brokerages recommended a buy rating on the LIC stock.

While Emkay upgraded the stock from an earlier hold stance, Motilal Oswal reiterated its buy, arguing that India's largest life insurer has levers in place to maintain its industry-leading position and ramp up growth in the highly profitable product segments.

The stock today fell 1.4% to the day's low of Rs 599.20 on the NSE in the opening trade amid weakness in the overall markets. Benchmark indices S&P BSE Sensex and Nifty were trading 0.40% lower around 9:25 am.


The state-run insurer had on Friday reported an over 50% YoY fall in net profit for the quarter ended September 2023 to Rs 7,925 crore. The net premium income declined by nearly 19% on year to Rs 1.07 lakh crore.

However, the profit number may not be comparable on a YoY basis, since LIC changed its accounting policy in the same quarter last year for transfer of amount pertaining to the accretion on the Available Solvency Margin from Non Participating Policyholders Account to Shareholder’s Account. Accordingly, it transferred a total amount of Rs 27,241 crore during FY23.

Here is what brokerages recommended:

Emkay: Buy | Target: Rs 760
Brokerage EMmkay upgraded the stock to buy from an earlier hold rating and also raised its price target to Rs 760 from Rs 680. The company witnessed a weaker growth, strong equity market-led EV boost and another pension drag, Emkay said in its post earnings stock review. The weaker growth situation and sticky OpEx cloud the long-term outlook, it said. However these structural issues are priced-in, it said while adding that higher surplus generation and slower growth could lead to a step jump in dividend, as solvency is healthy.

Motilal Oswal: Buy | Target: Rs 850
Motilal raised its Embedded Value (EV) estimates owing to better-than expected equity market returns and reiterated its buy rating with a target price of Rs 850.

LIC has levers in place to maintain its industry-leading position and ramp up growth in the highly profitable product segments mainly Protection, Non-PAR, and savings annuity, the brokerage said. However, changing gears for such a vast organization requires a superior
and well-thought out execution plan, Motilal said and cut its VNB (value of new businesses) estimates to factor in the decline in VNB margins.

LIC is trading at 0.6X FY24E EV, which appears reasonable, considering the gradual recovery in margin and diversification in the business mix, Motilal said.

(You can now subscribe to our ETMarkets WhatsApp channel)

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)