Target: ₹830

CMP: ₹708.55

LIC disclosed its Indian Embedded Value (IEV) and other key numbers mainly VNB, margin, and sensitivity data for FY22.

Embedded value (EV) stood at ₹5.41 lakh crore in FY22 (broadly similar to the last disclosed EV for Sep’21; 4.7 per cent lower v/s our estimate). EV is significantly higher in FY22 as compared to FY21 levels due to the bifurcation of a single fund into a separate PAR and Non-PAR fund.

Value of New Business (VNB) stood at ₹7,620 crore in FY22, 34 per cent above our estimate of ₹5,670 crore. VNB grew 83 per cent y-o-y in FY22 v/s an 11 per cent growth in APE to ₹50,400 crore. VNB margin improved to 15.1 per cent in FY22 v/s 9.9 per cent in FY21. This is significantly ahead of our estimate of 10.7 per cent in FY22.

LIC has all the levers in place to maintain its industryleading position and ramp up growth in highly profitable product segments (mainly Protection and Non-PAR Savings/Annuity). However, changing gears for such a vast organisation requires superior and well-thought execution that also has to endure frequent rotation at the top management level.

We estimate LIC to deliver about 10 per cent CAGR in NBP over FY22-24, while improving margin trajectory and stability in the capital market will enable improved EV growth going forward. LIC’s valuation at 0.7x FY24 EV appears reasonable.