LIC: Upgrade to BUY – Undemanding valuation; structural issues priced-in: Emkay

LIC reported broadly in-line numbers in H1FY24, owing to weaker growth, strong boost in embedded value led by equity-market performance, and part provision on account of increased family pension liabilities. We continue to perceive that structural challenges—such as slower growth-led market-share loss, sticky operating expenses, and higher sensitivity to equity market-led EV volatility—are likely to cloud LIC’s outlook. However, LIC is currently trading at ~0.50x Sep-25E P/EV, with the structural challenges and a possible share sale by the government already in the price. We upgrade the stock to BUY, as we believe higher surplus generation and slower growth could lead to a step jump in dividend, as solvency is healthy. Our fair value Sep-24E TP is Rs760/share (offering 25% upside), and we value the shares at 0.63x Sep-25 EV (Cost of Equity: 13%; Operating RoEV: 10%; Single Stage Growth: 5%).