Yes Securities, a brokerage house, recently notified that it has added Life Insurance Corporation of India (LIC) to its buy list, maintaining a target price of ₹1,175 per share. In addition to LIC, the firm has already given buy ratings to Max Financial, SBI Life, and add ratings to ICICI Prudential Life and HDFC Life within the insurance sector.
LIC share price today surged nearly 4%; the stock opened at ₹920 apiece on the BSE. LIC share price today touched an intraday high of ₹952.50 and an intraday low of ₹916.40 per share. According to Rajesh Bhosale, Equity Technical and Derivative Analyst at Angel One, the LIC share price has experienced a strong bounce this week after finding support near the 89 WEMA. While there are some bullish reversal signals, the prices are currently approaching a key resistance zone around ₹950-960. A breakout above this level could lead to further movement towards the ₹1,050-1,100 range. On the other hand, prices have established a base around the ₹900 level.
Returning to the brokerage report, Yes Securities outlined the reasons for including LIC in its life insurance sector portfolio. The brokerage highlighted several key points:
LIC’s margin is lower than listed peers
Although LIC’s margins are currently lower than those of its listed peers, it has mechanisms in place to improve these margins and is showing the strongest growth potential in this area.
“Share of lowmargin Par business in total APE stood at 50.1% in 2QFY25 for LIC compared with 5.9-12.7% for listed peers. We think LIC can reduce this share materially going forward and this process is already underway, with share of Par declining 8.8% YoY,” said the brokerage.
LIC is displaying the strongest VNB growth YoY
The previous sluggishness in Annualized Premium Equivalent (APE) growth is now behind, and together with margin expansion, LIC is demonstrating the highest year-over-year growth in Value of New Business (VNB).
“Coupled with VNB margin expansion, LIC has displayed the highest VNB growth on YoY basis, which has amounted to 46.9% YoY for LIC in 2QFY25, which is far higher than other listed peers,” the brokerage said.
Reasonable control over its cost
Based on the expense ratio, LIC appears to have effective control over its costs.
“LIC’s cost control is reasonably good as reflected in its opex ratio of 8.1% for 2QFY25 and, again, only SBIL has a lower opex ratio than LIC,” said Yes Securities in its report.
Stock Recommendations
The brokerage prefers Max Financial and SBI Life in the life insurance sector, followed by LIC. In its report, Yes Securities expressed that it is pleased to include LIC on its BUY list, as they believe that the pace of improvement in key metrics has increased and the expansion of Return on Embedded Value (RoEV) is promising.
Disclaimer: The views and recommendations above are those of individual analysts, experts and broking companies, not of Mint. We advise investors to check with certified experts before making any investment decision.
