Reduce ICICI Lombard; target of Rs 1650: Emkay Global Financial

Emkay Global Financial's research report on ICICI Lombard

ICICIGI is well on track to achieve 102% CoR by FY25E; its shares have run up ~25% (vs NIFTY50 up ~0%) post good Q3FY24 results. Recent outperformance of ICICI shares appears to be fully pricing-in improved operational performance and optimism of: i) no near-term headwind for GI on the Regulatory front; ii) minimum ~0.8% stake purchase by ICICI Bank before 9-Sep-24; iii) material improvement in CoR and EPS on Ind-AS implementation starting Apr-25. But we also see challenges: 1) likelihood of no hike in Motor TP tariffs causing lower industry growth and worsening of combined ratio in the TP segment; 2) prospect of greater intensity in Motor OD and Retail Health to drive higher distribution payouts and pressure on pricing, in pursuit of growth by smaller players; 3) price revision-led growth moderating in the Health segment.

Outlook

Against this backdrop, we marginally revise our FY24-26 estimates, leading to ~1-2% cut in GWP, ~0.4ppt increase in CoR and ~3-4% cut in EPS for FY25-26E. We downgrade the stock to REDUCE from Add, with Mar-25E TP of Rs1,650 (vs. Dec-24E TP of Rs1,600 earlier), implying 28x FY26E P/E and 5.2x FY26E P/B.

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ICICI Lombard - 2922024 - emkay