ICICI Lombard: 5 key reasons why Jefferies sees nearly 20% rise in the stock in 2024
₹1,491.95, hit on December 1, 2023. Despite the muted returns, global brokerage house Jefferies has a ‘buy’ call on the insurance stock with a target price of ₹1,730, implying an over 19 percent upside. The brokerage elevated ICICI Lombard to one of its top picks, citing five compelling triggers for optimism.
Firstly, the sector is expected to witness robust premium growth of 14 percent. Secondly, competitive pressures are easing, attributed in part to EOM norms. Thirdly, the combination of these factors along with network expansion is anticipated to propel ICICI Lombard to achieve a premium growth rate of 17 percent CAGR and concurrently reduce the Combined Ratio (COR) by 100-200bps between FY24 and FY26.
Additionally, Jefferies notes that ICICI Bank is obligated to acquire a 2.5-4 percent stake in ICICI Lombard by September 2024. Lastly, the transition to IFRS accounting is projected to lower COR by 400bps, contributing to enhanced profitability for the firm. "Over the past 4 years, ICICI Lombard stock price has been flat whereas EPS has risen by 60 percent over FY20-24e.
In 2023, the stock was up 10 percent vs 20 percent for the market. We believe that these five triggers can be positive for the firm and we rate the stock as Buy with a PT of Rs1,730 based on 33x FY26 PE," it said. The brokerage noted that ICICI Lombard is the leading private general insurer in India, with a track record of robust profitable growth.
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