The stock of the Life Insurance Corporation of India jumped over 3 per cent in early deals on Tuesday, after the insurance major came out with the decent Q1FY23 results.

The stock jumped 3.1 per cent to ₹703.65 on the NSE (at 10.30 am) as the insurer posted a multifold increase in net profit at ₹682.89 crore for Q1FY23 against ₹2.94 crore reported in the same period year-ago. The total income came at ₹1,68,881 crore (₹1,54,153 crore). However, sequentially the net profit dipped and the insurance major posted an impressive profit of ₹2,371 crore.

M-cap: Just behind Bajaj Finance

However, analysts are divided as some see a rough road ahead for the insurer though there is some headroom for the stock appreciation. A few believe the stock entering in the Nifty Next 50 index may fuel buying interest. With today's gain, the stock has entered the top 10 in market-capitalisation list. Currently, it commands a market cap of ₹4.44-lakh crore, just behind Bajaj Finance's ₹4.45-lakh crore.

According to Emkay Global Finance, the LIC has registered a satisfactory performance in Q1FY23. "However, the Q1 performance does not address our key concerns regarding LIC, thus leading to our neutral view on the stock," it said in a note with a price target of ₹800.

"Despite slight marginal improvement, the 13th-month policy persistency of about 63 per cent and premium persistency of nearly 75 per cent fail to convince us about the sales and servicing process of LIC, as the 13th-month lapse would lead to complete forfeit of the customer's first-year premium in a non-ULIP dominant policy base," it said.

‘To remain under pressure'

Additionally, the relatively-better returns of the LIC par product (for persistent policyholders) have been helped by 95:5 surplus sharing (including complete surplus from the non-par book) and lapses. Now, with the fund segregation in place, and the surplus sharing ratio having gradually improved to 90:10, the return on par product (bonus rates) is likely to come under pressure, Emkay Global said.

However, Motilal Oswal Financial, said LIC has all the levers in place to maintain its 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 organisation requires a superior and well-thought-out execution, it cautioned.

“We expect LIC to deliver nearly 13 per cent CAGR in APE during FY22-24, while VNB margin is likely to improve to 14.6 per cent. However, we estimate operating RoEV to remain modest at about 12.4 per cent on a lower margin profile than its private peers,” the domestic brokerage said in a report while retaining its ‘Buy’ stance with a target price of ₹830.

Equity investments

Meanwhile, LIC on Friday while announcing its Q1 result said, it had invested ₹34,000 crore in equities in the first quarter of the financial year. It bought equities worth ₹46,444 crore, but booked a profit of ₹12,444 crore.

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