ICICI Lombard’s share price dips over 4% as brokerages trim target price after Q4 results, but retains outlook

At the time of writing, ICICI Lombard’s share price traded at ₹1083.15 apiece down by ₹47.40 or 1.2% on BSE. The stock was near its day’s low of ₹1,080.80 apiece.

Also, the stock was just a couple of rupees away from its 52-week low mark of ₹1,049.10 apiece.

At the current market price, the company’s market cap is nearly ₹53,197 crore.

In Q4FY23, ICICI Lombard recorded a net profit of ₹436.96 crore, rising by 39.82% compared to a profit of ₹312.51 crore in the same quarter a year ago. It posted a premium earned (net) of ₹3,726.03 crore in Q4FY23 compared to ₹3,317.78 crore in Q4FY22, increasing by over 12% YoY.

The company’s Return on Average Equity (ROAE) was 17.7% in FY2023 as against 14.7% in FY2022, whereas ROAE was 17.2% in Q4 FY2023 as against 14.0% in Q4 FY2022.

Furthermore, the company’s solvency ratio was 2.51x as of March 31, 2023, as against 2.45x as of December 31, 2022, which was higher than the minimum regulatory requirement of 1.50x. The solvency ratio was 2.46x as of March 31, 2022.

ICICI Lombard has proposed a final dividend of ₹ 5.50 per share for FY2023. Overall, in the fiscal, the company’s overall dividend including the proposed final dividend stood at ₹10 per share.

Emkay Global analysts in their note said, “ICICI Lombard (ICICIGI) logged a satisfactory performance in Q4FY23, with a combined ratio (CoR) at 104.2% coming in line with our estimates. Reaffirmation of guidance of 102% CoR by FY25, despite the dynamic regulatory and insurance market environment, was majorly reassuring. Overall, Q4 marks a good finish to a decent FY23, in which CoR of 104.5% was worse than the company’s own track record, albeit commendable amid the difficult external conditions.”

Looking ahead, Emkay’s note said, “The will continue its strategy of growing above the market in selected business segments. The hardening of reinsurance prices and the regulatory nudge with regard to freeing up prices in commercial lines will have some bearing on profitability in these segments, but Management remains confident of achieving its FY25 CoR guidance.”

On valuation, Emkay’s note added, “We reiterate our BUY rating on the stock, with our revised TP of Rs1,400/share (down from Rs1,490, on account of higher Cost of Equity), implying FY25E P/E of 27x and P/B of 5x. The altering regulatory landscape, hyper-competitive market environment in Motor OD, and regulatory requirement of ~18% stake sale by the promoter (ICICI Bank) have been some of the overhangs on the stock. While regulatory clarity is emerging, any improvement in competitive intensity or any clarity on the stake sale by ICICI Bank could be the next positive trigger for the stock.”

However, Emkay has cut its target price for ICICI Lombard by 6%.

Meanwhile, ICICI Direct its in note said, “the CICI Lombard stock has remained range bound in the last 12 months. Leadership in a market with long-term growth potential remains positive. Steady market share coupled with a gradual improvement in combined ratio bodes well but sustainable delivery is awaited to gain confidence.”

Accordingly, ICICI Direct has maintained its ‘Hold” rating on the stock. It added, “We value ICICI Lombard at ~2.1x FY25E premium (50% weight), ~1.1x FY25E float (50% weight) and revise our target price from ₹1300 to ₹1250/share.”

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