It was a perfect Friday for the state-owned insurance companies as index heavyweights Life Insurance Corporation (LIC) of India, General Insurance Corporation of India (GIC), and The New India Assurance Company surged up to 20% intraday, in an otherwise subdued broader market. Shares of GIC and New India Assurance Company touched their respective 52-week highs amid sustained buying momentum.
Shares of LIC of India, the country’s largest life insurer, rallied as much as 10.35% to hit a 10-week high of ₹681.80 apiece, registering their largest intraday gain since listing in May 2022. At the end of today’s trade, LIC shares were quoting at ₹677.65, up 9.69%, with a market capitalisation of ₹4.28 lakh crore on the BSE.
In a similar trend, GIC of India surged as much as 19.9% to hit a fresh 52-week high of ₹316 level. The PSU insurer finally settled at 16.7% higher at ₹307.55 apiece on the BSE.
The New India Assurance Company also saw a surge in buying, with the share price jumping 20% to settle at a new 52-week high of ₹209.40 marks.
In the last few sessions, two PSU insurance companies – GIC and New India Assurance - have seen strong buying without any fundamental reasons.
GIC shares have risen in the seven out of the last eight sessions and gained 40% during the same period. While shares of New India Assurance ended in positive terrain in 14 out of 18 sessions this month. The stock has zoomed more than 50% in November.
Meanwhile, LIC of India shares witnessed a mixed trend with shares ending in green in ten out of 18 sessions this month, growing by 13%. The stock gained momentum after the management projected that the company aims to achieve double-digit growth in new business premiums for FY24.
"We are projecting double-digit growth over the last year. We are going to achieve that because a recent trend is showing an uptick in individual retail business,” says LIC's Chairman, Siddhartha Mohanty in an interview to a news wire.
Domestic brokerages Motilal Oswal and BOB Capital in their recent reports say that LIC is currently selling at a significant discount to its issue price. The brokerages opine the company is making the right efforts towards increasing VNB (value of new business) by pushing its product mix towards non-participating and expansion in non-agency distribution channels. While BOB Cap has given a target price of ₹767, Motilal Oswal projected a price of ₹850, a potential upside of 25% from the current levels.
“LIC is trading at 0.6x FY24E enterprise value (EV), which appears reasonable, considering the gradual recovery in margin and diversification in the business mix. We cut our VNB estimates to factor in the decline in VNB margins. However, we raise our EV estimates owing to better-than-expected equity market returns,” Motilal Oswal says in a report released on November 11.
BOB Capital in its report says it has maintained ‘BUY’ given LIC’s entrenched brand equity, market leadership, superior agency force, focus on high-margin products and robust claim settlement ratio. “The stock is currently trading at 0.6x FY25E EV, a 75% discount to private listed peers which appears unwarranted. We value LIC at an unchanged 0.7x FY25E EV, a narrower 70% discount to peers. Based on our revised estimates, our target price changes slightly to ₹767 (vs. ₹770), which offers 26% upside,” it says in a report released on November 11.
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