ICICI Lombard slumps as Q3 numbers miss Street estimates; analysts still remain upbeat

Despite the lower profit and revenue growth numbers, foreign brokerages are bullish on the stock. Morgan Stanley has an Overweight rating on it with a target price of Rs 1495 per share

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ICICI Lombard General Insurance declined 4 percent on January 18 after its December quarter profit of Rs 353 crore failed to meet consensus Street estimate of Rs 448.6 crore. The general insurer’s profit rose 11 percent year-on-year, it said in an exchange filing.

At 12 pm, the stock was quoting at Rs 1,188 per share on the National Stock Exchange, lower by 4.8 percent. The stock has slumped 5 percent in the past six months and 17 percent in the past one year.

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The company’s gross direct premium income  for the quarter rose 16.9 percent, lower than the industry growth of 18.1 percent, at Rs 5,493 crore. In the year-ago period, the same stood at Rs 4,699 crore.

Excluding crop segment, the gross direct premium income growth was 17.1 percent, which is higher than the industry growth of 16.6 percent, the company said in a statement.

Despite the lower profit and revenue growth numbers, foreign brokerages are bullish on the stock. Morgan Stanley has an Overweight rating on it with a target price of Rs 1495 per share.

“Underwriting loss and investment income were lower than estimates. But, management has guided for continued investments in retail health business and gradual improvement in return on equity,” it noted.

Also Read: ICICI Lombard Q3 net profit rises 11% to Rs 353 crore

Return on average equity (ROAE) was 18.1 percent in the first nine months of FY23 as against 15.1 percent in the same period last year. Underwriting loss was at Rs 290 crore in Q3 FY23 compared to a loss of Rs 150 crore in Q2.

Jefferies also has a Buy call on the stock with target price of Rs 1620 percent. “Profit growth missed estimates due to upfront charge-off of sales costs. Premium growth and synergies can aid 20 percent compounded annual growth rate (CAGR) in profit over FY23-25 and ROE of 19 percent,” said the firm.

Domestic brokerage firm Motilal Oswal Financial Services has cut earnings estimates by 10 percent but has retained its Buy rating on the stock. “Competitive intensity remains high in the Motor OD segment, especially within the passenger car category,” MOFS noted. It has a target price of Rs 1500.

ICICI Lombard is a leader in motor insurance apart from health, crop, fire, personal accident, marine, engineering, and liability insurance. The company has issued over 29.3 million policies, settled 2.3 million claims and has a gross written premium of Rs 18,562 crore as of March 2022.