ICICI Prudential Life Insurance Company’s share price slumped 10% to an intra-day low of Rs 572 despite reporting a 43% year-on-year jump in its net profit.
The life insurance company reported a net profit of Rs 325 crore compared to Rs 227 crore in the same quarter a year ago.
However, despite a stellar performance, the share price of ICICI Prudential fell to trade in the red.
Elara Securities cuts target price and downgrades rating
The brokerage firm, Elara Securities, has slashed the target price and rating on the stock. It has cut the target price to Rs 750 from Rs 900 and downgraded the rating to ‘Accumulate’ from ‘Buy’. According to Elara Securities, the company is facing regulatory changes and a slowdown in ULIP growth. Also, it is not able to offset it with non-par growth. It revised its price-to-earnings of enterprise value estimate to 1.8x from 2.2x earlier. This was done after factoring in a 50 basis points increase in risk premium to account for potential regulatory scrutiny of the bancassurance channel.
Further, the brokerage firm added that the absolute value of the new business (VNB) growth was lower than the annualised premium equivalent (APE) growth on account of the decline in the VNB margin. “The margin contraction is attributable to a higher share of lumpy and low-margin group fund business, which increased 4.5x YoY,” read the research report by Elara Securities.
ICICI Prudential Q2 performance
The company reported an increase of 3% YoY in profit for the second quarter of FY25standing at Rs 252 crore. The hike in sales of ULIPs, which usually have lower profit margins, contracted the VNB margins. The company’s VNB margin fell to 23.7% for the first half of FY25, from 28.8% in the same quarter a year ago.
ICICI Prudential Vs Nifty 50
The share price of ICICI Prudential Life Insurance Company has fallen 10% in the last five trading sessions. The stock has wiped out 9% of investors’ money in the past one month almost 7% in the previous six months. However, the share price of ICICI Prudential Life has risen over 23% in the last one year.
To compare, the benchmark index, Nifty 50 has fallen 1.45% in the last five trading days. The index has declined by more than 3% in the last one month and 6% in the previous six months.
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