Q4FY23 Review: ICICI Lombard General: Steady quarter; GDPI growth key in FY24

19 Apr 2023 , 10:49 AM

ICICI Lombard (ILOM) reported 40% YoY growth in net profit in Q4FY23, led by lower-than-expected commission ratio. However, GDPI growth was weak (7% YoY) due to a one-off transaction in Motor and lower crop GDPI, while loss ratios worsened. Management reiterated that in order to grow faster, ILOM will continue to invest in digital, health agency channel and CVs book. 

Analysts at IIFL Capital Services continue to believe that ILOM’s earnings will grow strongly at 29% CAGR over FY23-25, led by a combination of: (1) Steady new-vehicle sales (2) Increased focus and investments in Retail Health (3) Materializing merger synergies (4) Rising interest rates. However, improvement in combined ratio is still progressing slowly, as investments are more than offsetting cost synergies from BAX acquisition, believe analysts at IIFL Capital Services. They have fine-tuned their EPS estimates and have maintained their Target Price. They are forecasting 12%/29% GDPI/EPS CAGR over FY23-25. Stock is trading at 25x/20x FY24/FY25 P/E, at near trough multiples.