Target: ₹830

CMP: ₹604.05

LIC has reported a PAT of ₹13,430 crore in Q4-FY23, up 4x YoY. This was a result of the transfer of ₹7,300 crore from the Non-Par segment to shareholders’ account pertaining to accretion on the available solvency margin in Q4-FY23. For FY23, PAT grew 8x YoY to ₹36,400 crore.

APE grew 12 per cent YoY (55 per cent QoQ) to ₹19,130 crore in Q4-FY23 (₹56,680 crore in FY23).

Q4-FY23 VNB stood at ₹3,700 crore as VNB margin increased by 476bp QoQ to 19.4 per cent. For FY23, VNB margin improved to 16.2 per cent v/s 15.1 per cent in FY22.

LICI has the levers in place to maintain the industry-leading position and ramp up growth in the highly profitable product segments (mainly Protection, Non-PAR, and Savings Annuity). However, changing gears for such a vast organization requires a superior and well-thought out execution.

We expect LIC to deliver a 15 per cent CAGR in APE over FY23-25, thus enabling a 27 per cent VNB CAGR. However, we expect operating RoEV to remain modest at 10.9 per cent, given its lower margin profile than private peers and a large EV base.

LIC is trading at 0.6x FY24E EV, which appears reasonable considering the gradual recovery in margin and diversification in the business mix. We maintain our BUY rating with a TP of ₹830 (0.8x Sep’24E EV)