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ICICI Lombard General Insurance Company Ltd. shares are in focus on Wednesday, April 16, as brokerages downgraded and cut their price targets on the stock after its fourth quarter results.
Brokerage firm Morgan Stanley has downgraded the stock to "equal-weight" from "overweight" earlier, and has cut its price target down to ₹1,855 apiece. The revised price target is nearly the same level as Tuesday's closing price for the stock.
Meanwhile. Nuvama has a "buy" rating on the stock and has cut its price target by 12.5% from ₹2,400 per share to ₹2,100 a piece. This still implies an upside potential of 14.6% from its previous closing price.
Morgan Stanley said ICICI Lombard missed its fourth quarter profit after tax estimate due to weaker underwriting results and lower investment income.
It said it likes ICICI Lombard's profitable growth focus but sees limited upside at the current valuation of 26 times financial year 26 price-to-earnings estimates, amid weak topline growth, lower investment income and tepid earnings growth.
Nuvama said ICICI Lombard delivered a soft 10.2% gross written premium as a result of a slowdown in new vehicle sales and deferred accounting on long-term products.
The brokerage added that ICICI Lombard's combined ratio dropped 23 bps sequentially, while increasing 26 bps yearly to 102.5%. The loss ratio increased 298 bps from the previous year and 578 bps from the previous quarter to 71.6% but were offset by lower expense ratios which declined 272 bps from the last year and 601 bps sequentially to 30.9%. Its underwriting loss stood at ₹210 crore, Nuvama said.
ICICI Lombard's weak investment income led to adjusted profit after tax fall of 1.9% from the previous year and 29.7% from the previous quarter to 510 crore, it added.
Of the 28 analysts that have coverage on the stock, 19 have a "buy" rating, seven have a "hold" rating and two have a "sell" rating.
ICICI Lombard's net earned premium gained 20% to ₹5,226 crore in the March quarter from ₹4,368 crore in the previous year.
Its underwriting loss declined 11% to ₹210 crore from ₹236 crore in the previous fiscal.
Its operating profit declined 26% to ₹416 crore from ₹562 crore in the previous year
ICICI Lombard's combined ratio was up 20 bps at 102.5% from 102.3% in the last year. Its profit after tax declined 2% to ₹510 crore from ₹520 crore.
ICICI Lombard shares ended the previous session 6.6% higher. The stock has declined 11.74% in the last six months.
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