LIC Stock Portfolio Decline: Kotak Lowers Target Price
Life Insurance Corporation of India Ltd (LIC) has recently faced a challenging time in the stock market, with Kotak Institutional Equities revising its fair value target on the stock to Rs 1,175 from Rs 1,250. Despite the decline, Kotak believes that LIC’s valuations are still attractive, maintaining a ‘Buy’ rating on the stock. The brokerage highlighted that the recent market correction and a significant slowdown in business, particularly following the surrender value guidelines, have continued to impact LIC’s prospects.
LIC Stock Portfolio Decline
According to Kotak, LIC’s equity investment book has seen a notable decrease in the March quarter, dropping 6.9% to Rs 13,73,900 crore from Rs 14,76,300 crore at the end of 2024. This decline follows a 5.3% fall in the previous quarter and a total 12% decrease since September 2024. Despite these setbacks, on a financial year-to-date basis, LIC’s overall equity investment book has increased by 2.2%, as per Kotak’s calculations.
Kotak further analyzed LIC’s holdings in BSE 200 companies, with stakes of over 1%, to determine the current market value of its investments. The brokerage noted that the stock market trends significantly influence over 50% of LIC’s embedded value (EV). The slowdown in annual premium equivalent (APE) and the company’s strategies to address this issue are key areas to monitor.
What’s Next for LIC?
The recent financial performance of LIC has shown a 24% year-on-year decline in APE in the third quarter of FY25, following a growth of 24% in the first half of the fiscal year. Additionally, January witnessed an 11% decrease, while February saw a 21% decline. Kotak emphasized that March typically represents a crucial period for LIC, with high expectations for business performance during this time.
LIC has introduced several new non-par products in recent quarters and has launched a pension product to drive high-margin business. The company’s management is closely monitoring these developments and taking necessary actions to address the decline in business. Kotak has adjusted its APE estimates for FY2025 and FY2026, now projecting a 5% decline and a 6% decline, respectively. These revisions reflect the current weakness in LIC’s business operations.
In conclusion, while Kotak has lowered its fair value target for LIC, the brokerage maintains a positive outlook on the stock, considering it a ‘Buy’. The ongoing challenges faced by LIC in the stock market present an opportunity for the company to adapt its strategies and enhance its performance in the future.
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