ICICI Lombard Normal Insurance coverage’s share worth has tumbled greater than 9 per cent to this point this 12 months, largely in keeping with the headline indices. It has fallen greater than 23 per cent from its September 2021 highs, placing the inventory firmly within the bear’s grip. Nevertheless, Motilal Oswal, in its current report, initiated protection on the inventory with a ‘Purchase’ ranking and a goal worth of Rs 1,500, signaling a possible upside of over 17 per cent within the counter from its earlier shut of Rs 1,277.40.
“The overall insurance coverage trade is all set to ship a wholesome 12 per cent CAGR in premium over the subsequent decade led by 1) wholesome development in auto gross sales, 2) sustained sturdy momentum in medical insurance demand and three) business insurance coverage strains rising in keeping with a sturdy financial progress. Amidst this, ICICIGI has emerged to be India’s largest personal sector basic insurance coverage firm put up its merger with Bharti Axa (BAXA). Stronger correlation with new auto gross sales, investments into well being distribution channel, synergies from BAXA merger and anticipated outcomes of previous investments in know-how are the important thing earnings triggers for ICICIGI. Throughout FY22-24, we see the corporate delivering a premium/PAT CAGR of 19 per cent/28 per cent and a RoE of 19.1 per cent in FY24,” Motilal Oswal mentioned in a report.
“Amidst this, ICICI Lombard has emerged to be India’s largest personal sector basic insurance coverage firm put up its merger with Bharti Axa (BAXA). Stronger correlation with new auto gross sales, investments into well being distribution channels, synergies from BAXA merger and anticipated outcomes of previous investments in know-how are the important thing earnings triggers for ICICI Lombard,” it mentioned.
The corporate with a market capitalization of greater than Rs 62,000 crore as of July 7, 2022, had hit a 52-week excessive of Rs 1,674 on September 22, 2021.
Why The Step Correction?
Motilal Oswal highlighted that the inventory has corrected by 31 per cent over the previous 18 months, at the same time as Nifty50 remained flat. The steep correction has been on account of a shift within the administration’s focus to progress from profitability earlier and an anticipated discount in ICICI Financial institution’s stake to sub-30 per cent ranges by September 2023 as per RBI laws from 48 per cent at current.
“After the correction, the inventory is buying and selling close to an all-time low one-year ahead valuation. The inventory ought to re-rate in direction of its historic stake valuation because it delivers worthwhile progress and readability emerges on the sale,” the brokerage added.
The worldwide brokerage agency Credit score Suisse has additionally initiated the protection of ICICI Lombard Normal Insurance coverage and is bullish on the inventory. “The inventory has derated from long-term imply of 40x fwd earnings to 25x at the moment. Whereas the delayed ROE restoration warrants a reduction to long-term a number of, we consider execution on progress and well being franchise scale-up will drive re-rating for the corporate,” Credit score Suisse mentioned.
With an ‘Outperform’ ranking, Credit score Suisse has pinned a goal worth of Rs 1,400 per share on the scrip. This translated to a robust 10% upside from Friday’s opening worth of Rs 1,273 per share. “We provoke with an OUTPERFORM ranking and worth of ILGI at 32x 24-month ahead earnings (20% low cost to LT imply) to reach at our goal worth of Rs1,400,” analysts mentioned.