Shares of leading insurers Life Insurance Corporation (LIC) and HDFC Life Insurance have turned weak amid volatile market conditions and fading investor interest in the last few months. LIC stock has disappointed investors since its market debut. The stock of India’s largest insurance company has slipped over 31 per cent below its listing price. LIC stock made its debut at a discount of 8.62 per cent at Rs 867.20 on May 17 this year. It closed at Rs 595.45 on October 27, implying a decline of over 31 per cent to the listing price. Compared to the record high of Rs 920 on the listing day, the stock is down 35.65 per cent till date.
Investors have lost nearly Rs 1.72 lakh crore since listing in the LIC stock. In the current trading session, LIC shares were trading flat at Rs 591.85 against the previous close of Rs 595.45 on BSE. Market cap of LIC stood at Rs 3.74 lakh crore. Total 0.34 lakh shares of the firm changed hands amounting to a turnover of Rs 2.03 crore on BSE.
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The insurance sector stock is trading 0.72 percent higher to the 52-week low of Rs 588. The stock fell to the 52-week low on October 21, 2022.
The ongoing Russia-Ukraine war, economic slowdown and highly volatile global and domestic market conditions have dampened sentiment around the LIC stock.
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Some analysts have also attributed the correction in the stock to the high IPO price of the insurer. The company offered its shares in a price band of Rs 902-Rs 949 during the IPO.
It is yet to announce its earnings for the September quarter.
LIC reported a stellar set of earnings for the quarter ended June 2022. Net profit rose to Rs 682.88 crore in Q1 against a standalone profit of Rs 2.94 crore in the corresponding quarter of the last fiscal. Net premium income of LIC climbed 20.35 per cent YoY to Rs 98,351.76 crore. Other income came in at Rs 160.09 crore in Q1FY23 against Rs 145.47 crore in Q1FY22.
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Shares of another insurance behemoth HDFC Life Insurance have tumbled 22.35 per cent in a year. They are down 18.3 per cent this year.
In the current trading session, HDFC Life Insurance shares were trading flat at Rs 529.50 against the previous close of Rs 533 on BSE. Market cap of HDFC Life stood at Rs 1.13 lakh crore. Total 0.49 lakh shares of the firm changed hands amounting to a turnover of Rs 2.60 crore on BSE. The insurance sector stock has been falling for the last four days. The stock fell to a 52-week low of Rs 497.30 March 8, 2022.
In Q2 of the current fiscal, HDFC Life Insurance reported a 19 per cent growth in net profit to Rs 326.24 crore for the September quarter against net profit of Rs 274.16 crore in the corresponding quarter last fiscal. Net premium income in Q2 rose to nearly 15 per cent to Rs 1,3110.91 crore from Rs 11443.96 crore in the corresponding quarter last fiscal.
ICICI Securities has given a buy call on HDFC Life Insurance with a target price of Rs 755 against the market price of Rs 539.7. The brokerage maintained BUY with a target price unchanged at Rs 755 based on FY24E enterpise value of Rs 40,400 crore, 30x (unchanged) FY24E new business of Rs 3,900 crore and add Rs 23 per share of Exide Life based on 1.5x FY24E EV of Rs 3300 cr.
Motilal Oswal has assigned a neutral rating on HDFC Life Insurance with a target price of Rs 600 in its report dated October 22, 2022. “In 2QFY23, HDFC LIFE reported financial performance post-merger with Exide Life for the first time. As we incorporate this and adjust for the quarterly performance, we expect HDFC Life to deliver 26% value of new business CAGR over FY22-24 and estimate margin to remain 29% by FY24,” said Motilal Oswal.
Here’s a look at which stock do analysts prefer among the two in the long term .
Rajesh Sinha, senior research analyst at Bonanza Portfolio favours HDFC Life Insurance over LIC stock.
“At current valuations, one can shift to HDFC Life Insurance as it is more consistent performance than LIC with better value of new business (VNB) margins. We believe valuations of HDFC Life Insurance is reasonable, as it has a well-diversified product bouquet (no segment contributing to more than 30 per cent of the annual premium equivalent(APE)), best-in-class branding, and strong metrics. We believe HDFC Life Insurance is well placed to deliver strong and sustainable long-term APE growth. Looking at high long-term growth potential for the Indian insurance industry and strong fundamentals (robust balance sheet and consistent profitability) of HDFC Life Insurance, we advise investors to use any dip in the stock price to consider for long-term investment.”
Abhijeet from Tips2trade said, “Despite having steady fundamentals including decent return ratios & very low debt, barring Bajaj Finserv, the insurance sector hasn’t done well in terms of stock price returns this year including heavyweights like LIC & HDFC Life. Technically, though, LIC is heavily oversold on the charts and investors can start buying on daily close above Rs 620 for near term targets of Rs 685-710 in the near term. HDFC Life needs to close above Rs 540 for investors to buy for a target of Rs 595-605 in the near term.”