Target: ₹1,100
CMP: ₹923.90
Life Insurance Corporation of India has delivered a healthy performance during H1FY26, with APE at ₹29,030 crore (+3.6 per cent y-o-y) and nearly 2 per cent above our estimate, whereas VNB margin at 17.6 per cent (+140 bps y-o-y) was above our estimate of 16.8 per cent.
The beat on value on new business (VNB) margin was driven by multiple factors, including increase in the share of non-par products; higher product-level margins led by increase in minimum ticket size and sum assured; and movement in the yield curve.
Going forward, the management plans to continue selling products based on customer demand and remain focused on growing absolute VNB. It expects the impact of GST ITC losses on VNB margins to be offset by the increase in volume, better margins across products driven by increase in ticket size and sum assured and improvement in operating efficiency. To bake in the Q2 developments, we increase our average premium equivalent (APE) and VNB margin estimates by about 2 per cent and around 50bps, respectively; this results in about 5 per cent increase in VNB over FY26-28E.
We maintain Add on LIC, with unchanged Sep-26E TP of ₹1,100, implying around 0.7x FY27E P/EV.
Trading at a material discount to the EV and generating solid GAAP profit consistently, the VNB margin matters less for LIC shares; instead, the company would need to either deliver superior Retail APE growth to attract growth investors or distribute higher dividends.