On Wednesday, ICICI Lombard General Insurance Co. Ltd. (ICICIGI:IN) received an upgrade in its stock rating from CLSA, moving from a 'Hold' to an 'Outperform' status. Accompanying this upgrade, the firm also increased its price target for the insurer's shares to INR 2,000.00, up from the previous INR 1,760.00.
The positive shift in outlook is attributed to ICICI Lombard's impressive performance in its motor insurance premiums, which saw a 31% year-over-year growth in the first two months of the fiscal year 2025. This growth significantly outpaced the industry's average of 15%.
CLSA attributes the company's success to the decline in competitors' motor third-party loss ratios, which prompted them to scale back, allowing ICICI Lombard to capture more market share.
Furthermore, factors such as the increasing premiumization of cars and potential benefits arising from the Motor Vehicle Act may also be contributing to the growth of ICICI Lombard's motor insurance segment.
While CLSA awaits further management commentary, it has conservatively raised its overall premium growth estimate for the company by only 2 percentage points in the fiscal year 2025.
The new price target is based on an elevated Gordon-based target price-to-earnings (PE) multiple of 30 times. CLSA notes that ICICI Lombard's stock is currently trading at 29 times the fiscal year 2026 consensus earnings estimates.
With the revised price target, CLSA anticipates an 11% potential upside for the stock from its current level, prompting the upgrade in rating to 'Outperform' from the previous 'Hold' recommendation.
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