Life Insurance Corporation of India (LIC), the
state-owned insurance giant announced its Q4 FY 2024 results on 27th,
2024.LIC's AUM stood at Rs. 51 lakh crore greater than the combined GDPs of the
three neighboring countries Pakistan Nepal and Srilanka.
In this article we have discussed about LIC's share price analysis after Q4 results. Check it here.
LIC Profit Growth Limited:
The Life Insurance
Corporation of India (LIC) saw a marginal 2.5% increase in net profit, reaching
Rs 13,763 crore in the January-March quarter (Q4FY24). This limited growth was
mainly due to recent wage revisions. However, LIC's management has reassured that
this impact is temporary and won't affect future profits, as the wage revision
was a one-time event.
Surge in Net Premium Income:
LIC's net premium income
saw a significant rise, surging by 15 percent YoY to reach Rs 1.5 lakh crore.
This growth is a clear indication of the trust and confidence that
policyholders kept in LIC. The increase in premium income also reflects LIC's
successful strategies in customer acquisition and retention, highlighting its
strong market positioning.
LIC's Performance Glimpses in a Brief for the
Year Ended 31st March 2024:
Profit after tax Rs.40, 676 crore for the year ended 31st March,2024. Last year, it was Rs.
36, 397 crore. Bonus to participating policyholders at Rs. 52,956 crore. Board
recommends a dividend of Rs. 6 per share in addition to an interim dividend of
Rs. 4 declared earlier. AUM (Asset Under Management) increased by
18.48% to Rs.51,21,887 crore compared to Rs. 43,97,205 crore as on 31st March,
2023.
Total 20392973 policies were sold during the year 31st March, 2024 as compared to 20428937 policies sold in the individual segment during the year ended 31st March, 2023.It manages nearly Rs. 30 lakh crore assets out of Rs. 40 lakh crore policies sold in the country.
Impact of One-Time Wage Revision:
Despite the positive
financial indicators, LIC's profit growth was tempered by a one-time wage
revision in the quarter ending March 2024. Wage revisions are a common
occurrence in large organizations and are essential for maintaining employees'
satisfaction and productivity. However, they can have a short-term impact on
profitability as per management speech. For LIC, this revision was a necessary
step to ensure its workforce remains motivated and aligned with the company's
targets.
Rise in Management Expenses:
The one-time wage
revision led to a significant increase in LIC's management expenses, which rose
by 15 percent YoY to Rs 24,709 crore in Q4FY24. This is an increase of Rs
21,435 crore in the corresponding quarter of the previous year. The increase in
management expenses is a reflection of the rising costs associated with running
a large and complex organization like LIC.
Increase in Employee Remuneration and Welfare Expenses:
A notable component of
the increased management expenses was the rise in employee remuneration and
welfare costs. These expenses soared by 32 percent YoY, reaching Rs 13,749
crore in Q4FY24 from Q4FY23. This sharp increase underscores LIC's commitment
to investing in its workforce, ensuring that employees are well-compensated and
have access to necessary welfare benefits.
Strategic Implications and Future Outlook:
The financial results
for Q4FY24 indicates LIC's robust business model and strategic plans. The
increase in net profit and premium income shows that LIC continues to grow its
market share and maintain financial stability. However, the rise in management expenses,
particularly due to the one-time wage revision, highlights the importance of
balancing cost management with employee satisfactions.
Focus on Customer Acquisition and Retention:
LIC's significant rise
in net premium income indicates a successful focus on customer acquisition and
retention. As the insurance market becomes increasingly competitive,
maintaining and growing a loyal customer base is crucial. LIC's strategies in
this area appear to be paying off, contributing to its strong financial performance.
Managing Operational Costs:
The increase in
management expenses presents a challenge for LIC, but also an opportunity.
Effective cost management will be critical going forward. By implementing
efficient operational practices and leveraging technology, LIC can manage these
expenses while continuing to invest in its workforce and customer services.
Investing in Employees Welfare:
The rise in employee's
remuneration and welfare expenses reflect LIC's dedication to its employees.
Investing in human resources is vital for long-term success, as a motivated and
satisfied workforce is more productive and innovative. LIC's approach in this
regard is extremely positive that recognizes the company as an attractive
employer, capable of retaining top talent.
Technical Analysis of LICI Share Price:
On weekly chart, LIC has
made a cup and handle pattern (C&H). Now the stock is consolidating trying
to break out of the handle. If it breaks out of the pattern, then the stock can
give a move of Rs. 300 to Rs. 350, i.e. upto Rs. 1350 to Rs. 1400 as per the
pattern target from the base of the cup.
What
is a Cup Handel Pattern?
In technical analysis, Cup and Handle pattern is a chart pattern basically comprises of two components. First one is a cup and second one is a handle. It's a bullish continuation pattern, occurs in the middle of an uptrend. When the pattern is complete and gives a breakout of the prior high point or resistance, investors try to create buying position with the confirmation.
This bullish pattern was introduced by an American, William O'Neill in his book "How to make money in stocks", in 1988.
The depth of the cup should be one-third of the prior high in U shaped, followed by a downward sloping handle.
We will discuss in detail about
this pattern in our future blog post.
As of
now, LiC has its immediate support at Rs. 950 level, which if broken it may go
down upto Rs. 900 level which is the last line of defence. Because this level
is the first high it made on the listing day on which the stock got
listed.
As per our thumb rule
of IPO stock investment, we generally mark the highest level the stock made on
the first day of listing in the market. When the stock breaks this highest
point after returning back from the lower level, we immediately enter into the
stock.
From the chart
we can clearly see that the stock made its first high at Rs. 900 level on May
1st week, 2022 at the time of listing. In January, 2024 the stock crossed that
level and gave a good return to the investors touching a high at Rs.1175 level.
This is an amazing learning tip for the investors how to re-enter into a IPO
stock. It's an aha moment!
Now, LICI has its
immediate resistance at Rs. 1065 level, which if broken it may touch its 52-
week high of Rs. 1175 level, the strongest resistance of the stock. If the
stock breaks the lower level, it may touch the level of Rs. 900, which is its
resistance turned support. You can read our previous blog about Support and
Resistance, where you can learn when a support becomes resistance and when a
resistance becomes support.
Anyway, with the long-term investment point of view LICI is a strong player in the insurance sector.
Investors should make proper research before taking any financial decision.
Please stay with us for better analysis of the stock market in future.
Brokerage
View on LIC:
After LIC's Q4 release, brokers showed confidence in the
company's future growth. Analysts at JPMorgan kept an 'overweight' rating for
LIC, predicting a target price of Rs 1,340 per share, which suggests a 29%
increase from the current price. Likewise, Citi gave a 'buy' recommendation
with a target price of Rs 1,295 per share.
Conclusion:
LIC's performance in
Q4FY24 showcases its strong market position and effective strategic
initiatives. While the increase in management expenses due to the wage revision
posed a challenge, the overall financial results were positive. LIC's ability
to grow net profit and premium income, coupled with its commitment to employee's
welfare, places it well for continued success in the future.
As LIC navigates the complexities of the insurance market, its strategic focus on growth, cost management, and investment on employee welfare will be crucial in maintaining its leadership position. Stakeholders can remain confident in LIC's ability to deliver sustainable financial performance while meeting the needs of its customers and employee.
Disclaimer: The information provided on
MoneyWiseMind is for educational and informational purposes only. It is not
intended to be financial advice, and you should not rely on it as such. Before
making any financial decisions, you should consult a licensed financial advisor.
