The esteemed bank, Morgan Stanley as of Monday has initiated coverage on ICICI Prudential Life Insurance Company, with an ‘overweight’ rating with Rs 365, as target price. The firm stated that a balance of distribution mix and that the improving persistency ratio, which would result into a multiyear improvement of profitability, even as higher focus on Unit Linked Insurance Plans could result into a volatile state of growth.
“This should drive a strong 40 per cent VNB CARG during F16-19”, it was mentioned in the official note released on Tuesday. The concept of target price, basically implies an upside of about 19.5% from current levels. As of Wednesday, the 3rd of November, ICICI Prudential has ended down 2 per cent at Rs. 305.35 on the BSE and continues to trade below issue price of Rs. 334.
The brokerage firm went on to state that the Prudential Company’s margins have been way lower, when compared to its peers in spite of the industry’s leading persistency and the cost ratios, but the widened gap is likely to narrow in the coming times, with the increasing shares of protection mix, improvement of persistency ratios and considerably, higher economies of scale. This announcement was also accompanied by the firm stating that the valuations are significantly higher as compared to their regional peers, but it went on to justify itself in keeping with the ICICI Prudential’s superior operational metrics and their distribution tie-ups. These would allow the gains of market shares and improve the profitability in the domestic insurance market.
Morgan Stanley has thus raised the target price on ICICI Prudential by about 4 per cent which brings it to about Rs. 266, this is because they plan to assign higher valuation for the life insurance subsidiary, while at the same time retaining equal weight rating. The firm expects that the stock of ICICI Bank would be volatile depending on news flow around corporate stress. At the time of the announcement, their official spokesperson said that, “to become more constructive we either need to see big recoveries on exiting NPLs or improvement in core PPoP (pre-provision operating profit) margins. We prefer ICICI bank to state owned banks, but prefer retail private lenders and Axis Bank over the same”.
Brokerage firms like Morgan Stanley have the responsibility of selling various types of securities to banks like ICICI Prudential in the field of investment banking. Thus it becomes important for the professionals working here in to be well versed with the various core concepts of the financial situations and the knowledge of the various trends in the market. While someone with a background in finance or related fields could understand this piece of news, but would just be scratching over the surface. This is exactly the reason why a lot of companies prefer to hire candidates with experience in specialization courses and a refined C.V. Private Institutes today, are also striving to offer industry endorsed courses, which ensure that the individual would understand everything that the current markets need. Imarticus Learning is a part of the same sphere, offering courses and guidance in a bid to bridge the gap between academics and industry.
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