On Monday, Citi reiterated a Sell rating on ICICI Lombard (ICICIGI:IN) with a price target of INR 1,575.00. The firm's assessment followed ICICI Lombard's first-quarter financial year 2025 results, which showed a notable 48% year-over-year increase in profit after tax (PAT), primarily driven by high investment income. Excluding capital gains, the company's pre-tax profit (PBT) saw a 23% rise compared to the same period last year.
ICICI Lombard's performance, excluding crop premium, improved by 20% on a year-over-year basis and demonstrated even stronger growth rates of 22% and 13% year-over-year in the first two months of FY25 and June 2024, respectively. A significant contributor to this growth was the company's market share gains in the motor insurance segment.
The company's business in the business-to-business (B2B) sector remained strong, with a notable 90 basis points year-over-year increase in group health insurance. The improvement in the combined ratio, which decreased by 145 basis points year-over-year, was attributed to a reduction in commission and operating expense ratio.
The business mix shift and a marginal increase in the ceding ratio in select segments also played a role, despite an overall increase in gross commission and operating expenses ratio year-over-year in rapidly growing segments such as motor own damage (OD) and health insurance.
However, the report highlighted challenges such as a high proportion of price-sensitive and volatile B2B segments, an uptick in claims frequency in the growing health insurance vertical, and the potential for increased competition in retail segments. These factors underpin the rationale for the Sell rating and the price target of INR 1,575.00.
InvestingPro Insights
ICICI Lombard's robust growth trajectory, as highlighted by the recent surge in profit after tax, is echoed in the performance of ICICI Bank (IBN), which is also experiencing notable financial trends. According to InvestingPro data, ICICI Bank has a market capitalization of $104.53 billion, underscoring its significant presence in the banking sector. Furthermore, the bank's P/E ratio stands at 19.64, indicating a balanced valuation relative to its earnings.
InvestingPro Tips suggest that ICICI Bank has been consistently rewarding its shareholders, having raised its dividend for four consecutive years, signaling financial stability and a commitment to returning value. Additionally, the bank is trading at a low P/E ratio relative to near-term earnings growth, which could capture the interest of value investors looking for growth potential at a reasonable price.
Investors may also take note of the company's solid revenue growth, which was 35.34% for the last twelve months as of Q4 2024. This impressive growth rate, coupled with a strong operating income margin of 38.2%, reflects the bank's ability to efficiently convert revenues into profits.
For readers seeking a deeper dive into ICICI Bank's financials and future outlook, InvestingPro provides a wealth of additional tips. There are currently 10 more InvestingPro Tips available that can offer further insights into the bank's performance and market position. To access these valuable tips and enhance your investment strategy, consider using the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription.
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