Buy This Private Life Insurance Stock For 20% Potential Gain, VNB Margin Improves To 31%: Top Brokerage

ICICI Prudential Life delivered a decent H1 FY23 financial performance, led by sharp moderation in APE growth in Q2, and offset by sustained strong margins owing to a favorable product mix. Emkay Global, a top brokerage firm suggests investors buying the stock of ICICI Prudential Life.

Stock To Buy: Target Price

The Current Market Price (CMP) of ICICI Prudential Life is around Rs. 513. Emkay Global has estimated a Target Price for the stock at Rs. 620. This stock has the potential to give a 20.8% return, in the upcoming 1 year. It is a bluechip stock with a market capitalization of around Rs. 72,833 crore. ICICI Prudential Life Insurance Company Limited (ICICI Prudential Life) is promoted by ICICI Bank Limited and Prudential Corporation Holdings Limited.

Stock Outlook
Current Market Price (CMP)	Rs. 513
Target Price	Rs. 620
Potential 1 year return	20.80%
52 week high share price	Rs. 682.45
52 week low share price	Rs. 430

Stock Valuation

Retaining the buy rating, Emkay Global quoted, "While the robust VNB margins continue to impress, we still have concerns about return of topline (APE) growth. In this backdrop, we adjust our FY23-25 estimates to account for the developments in H1 (higher margin, but weaker growth) and reiterate our Buy rating, with our Sep-23 Target Price at Rs. 620/share. Post the recent under-performance of IPRU shares, the current valuation at ~FY23E P/EV of 2.1x is attractive, but return of growth is needed to drive a re-rating of the stock, in our view. "

VNB margin and APE growth

H1 VNB margin at 31% was better than our estimate of 29.4% and drove the ~5% beat on VNB. This margin surprise was largely an outcome of a favorable product mix, with ~30% YoY growth in Protection APE resulting in share of protection in mix increasing by 3.2ppts YoY to 20.2%. However, APE growth of 10.1% YoY in H1 was in line with our estimates, and the sharp moderation in Q2 APE growth at 1.1% YoY points to the continued struggle in growth delivery.

Improvement in operating metrics

Operating metrics (persistency, product mix, cost, etc) continued to improve for ICICI Prudential and look stronger relative to the industry's. However, as regards top-line growth, the many moving parts of its business and the prevailing difficult macroeconomic environment fail to give reassurance on the growth outlook. On the margin front, there are enough comforting factors, including continued focus on overall protection and annuity, coupled with robust demand of guaranteed non-par savings.

Disclaimer

The above stock was picked from the brokerage report of Emkay Global. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.