NEW DELHI: Life Insurance Corporation (LIC) ended in green for the third consecutive session on Wednesday but shares of the state-run insurer are unlikely to cross the initial public offering (IPO) price even a year from now, according to the target price assigned by global brokerages.
The best target of Rs 930 given by Bank of America (BoFA) is still falling 2% short of the issue price of Rs 949, while Goldman Sachs’ target price of Rs 700 is 35% and JP Morgan’s target price of Rs 840 is 13% away from the issue price. Most target prices are estimated for the end of the current financial year 2023.
This is a big setback for investors who participated in India’s largest IPO ever launched. Since the stock hit bourses on May 17th at the discount of 8%, it has fallen about 24%. In the last three sessions, it witnessed marginal recovery from its 52-week low of Rs 650 and closed the Wednesday session at Rs 668.55 apiece.
Bank of America in a report said there is headroom for growth of the insurer. It is in the view that LIC stock is available at a 47-70% discount in comparison to the private players. A global player in its segment, LIC can outperform going forward due to its widening penetration, analysts at BoFA noted.
Global brokerage JP Morgan initiated coverage on the stock with an overweight rating and has set a target price of Rs 849 per share in one year. JPMorgan said that LIC’s 0.75 times price to embedded value - is unduly harsh, even assuming no growth.
It said that in reality LIC has picked up growth recently and forecasted growth of 6% in FY22-24 for the insurer. “We believe the market views LIC as an equity market proxy and recent weakness in markets is overdone. We don’t foresee LIC trading at private sector valuations of 2-3 times P/EV (price to embedded value), but our March-23 price target of Rs 840 is based on 1 time FY23 P/EV, which we think is justified on a mostly par back book, excess assets on the B/S (balance sheet), and a 185% solvency ratio,” analysts at JP Morgan said.