InvestorQ : How do you see LIC stock at these levels. Is the stock worth buying at these prices?
Arya Nanda made post

How do you see LIC stock at these levels. Is the stock worth buying at these prices?

Anjana Aiyar answered.
2 months ago

LIC had a good quarter in terms of its performance in the June quarter compared to the private life players. For the June quarter, LIC reported a manifold jump in net profits at Rs683 crore. For the quarter, its net premiums grew by 20% yoy while the new business and renewal business grew by 35% and 9% respectively. The lifting of COVID restrictions also led to a sharp surge in the sales of policies by the feet on street agent network. On yoy basis, the first year premium came in at Rs7,429 crore against Rs5,088 crore in Q1FY22.

In the last few quarters, the company took a hit since most of its business happens through its network of over 13 lakh agents. Being a highly contact intensive business, it took a big hit during the pandemic. It had largely disrupted the work of its agents who focus on in-person engagement. Going ahead, LIC is expected to not only maintain the momentum but also to build on it gradually. LIC is expected to grow APE at 13% CAGR while the VNB margins that is the value of new business margins are likely to grow to 14.6%.

One intriguing factor is that the stock price has not reacted due to the overhang of supply in the market. It is still more than 25% below the IPO issue price and that is a worry for the stock and its investors. Also, the substantial supply has kept the stock under considerable pressure. LICI’s valuation stands at 0.7 times its FY24E EV, which is relatively reasonable. Now most of the brokers are also reverting to the price target of over Rs800 for LIC but that would still be well below its IPO price. When that will be crossed remains to be seen.