LIC stock price: JPMorgan overweight LIC, according to D-Street which misjudges the stock

Mumbai: JPMorgan believes the market is mispricing shares of the newly listed company, which are down more than 30% from the IPO price.

Initiating a hedge on the stock with an overweight rating and a target price of ₹840, JPMorgan said valuations were attractive. Shares of

ended up 1% higher at ₹661.25 on Monday after hitting a new low after trading at ₹650.

JPMorgan was also one of the leaders in LIC’s IPO.

“We believe the market views the LIC as an indicator of the stock market and recent market weakness is overblown. We do not expect LIC to trade at private sector valuations of 2-3x P/EV (price per relative to intrinsic value), but our March-₹23 price target of ₹840 is based on 1x FY23 P/EV, which we believe is justified based on backlog essentially by, excess assets over B/S (balance sheet) and a solvency ratio of 185%,” JPMorgan said.

JPMorgan said LIC is trading at 0.75 times FY23 price to intrinsic value based on FY23 earnings after a post-IPO correction that eroded market capitalization of ₹1.9 lakh-crore.

Agencies

About a month ago, LIC debuted in the market at a discount of over 8% from its issue price of ₹949 and listed at ₹872 per share on the BSE. The stock reached a post-listing high of Rs 920, but was never able to break above the issue price level. Even JPMorgan’s target price is around 12% lower than the IPO price.

LIC’s ₹21,000 crore IPO, which ran from May 4-9, was the largest IPO ever by an Indian company and ended with a subscription of 2.95 time. Analysts believe LIC’s listing coincided with a decline in market momentum, triggered by geopolitical tensions, rising interest rates and crude oil prices, which played a significant role in the sharp decline. after registration.

JPMorgan said LIC’s new business value is only 1% of its in-force policies. “With 99% of the value of old policies, we consider the 0.75x P/EV to be overly harsh, even assuming no growth. growth and we expect an estimated 6% growth for fiscal year 22-24,” JPMorgan said. .

Karen J. Nelson