LIC shares surge 9% as profit soars 11-fold in Q2 to Rs 15,952 crore

Shares of Life Insurance Corporation of India (LIC) surged 9 per cent to Rs 682.70 on the BSE in Monday's intra-day trade amid heavy volumes after the company reported 11-fold jump in its net profit at Rs 15,952 crore during July–September (Q2) quarter of FY23. The multifold increase in net profit was due to a change in its accounting policy, wherein it has transferred Rs 14,272 crore to the shareholders' account from the non-participatory account.

At 09:57 am, LIC was trading 6 per cent higher at Rs 663.95 on the BSE, as compared to 0.10 per cent decline in the S&P BSE Sensex. Trading volumes on the counter jumped over three-fold with a combined 4.8 million shares having changed hands on the NSE and BSE till the time of writing of this report.

The insurance behemoth reported a net premium income of Rs 1.32 trillion in Q2 of FY23, up 27 per cent year-on-year (YoY) from Rs 1.04 trillion in Q2 of FY22. Its first-year premium income rose 11 per cent YoY to Rs 9,125 crore while renewal premium was up 2 per cent to Rs 56,156 crore. Single premium income increased by 62 per cent YoY to Rs 66,901 crore.

Income from investments increased 9.89 per cent YoY to Rs 84,104 crore during Q2 of FY23. In the year-ago period, investment income was Rs 76,534 crore.

Business momentum for the corporation has been strong in FY23. As a result, it has gained market share on a first-year premium basis. LIC's market share increased to 67.72 per cent as of October from 63.25 in FY22. On an Annualised Premium Equivalent (APE) basis the total premium was Rs 25,228 crore for the six month period ended September, 2022.

LIC's gross non-performing asset (gross NPA) ratio declined 24 basis points over the preceding quarter and stood at 5.6 per cent at the end of the September quarter. It reported a net NPA of Rs 12.71 crore as of Q2.

"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 organization requires a superior and a well thought out execution," Motilal Oswal Financial Services said in a result update.

The brokerage firm expects LIC to deliver healthy APE growth, coupled with a rising VNB margin trajectory, due to a more optimal product mix. However, operating RoEV should remain modest due to a lower margin profile than its private peers. LIC’s valuation, at 0.6x FY24E EV, appears reasonable considering the gradual recovery in margin and diversification in the business mix, the brokerage firm said.

LIC is trading 28 per cent below its issue price of Rs 949 per share. It had hit a record low of Rs 588 on October 21, 2022. The company has made stock market debut on May 17, 2022.

Technical View

Bias: Positive

Target: Rs 705.50; Rs 729

Support: Rs 650; Rs 630.70

Resistance: Rs 688

With today's sharp 9 per cent rally, the stock price of LIC of India has not only managed to overcome its 50-DMA (Daily Moving Average) placed at Rs 630.70 for the first time since late August, but also has crossed the 100-DMA (Daily Moving Average) at Rs 657.70, and seen trading considerably above the higher-end of the Bollinger Bands on the daily chart. 

The short-term bias for the stock is likely to remain positive as long as the stock sustains above Rs 650, i.e. the higher-end of the Bollinger Bands on the daily chart. 

As per the quarterly Fibonacci chart, the stock has near resistance at Rs 688, above which the next targets should be Rs 705.50 and Rs 729.

The key momentum oscillators, both, on the daily and the weekly charts too are favourable, hence one can expect a positive bias on the stock in the near term.

(With inputs from Rex Cano)