ICICI Prudential Life shares decline 7% on Q4 earnings miss. What should investors do?

The company also saw a lower new business margin, hurt by a persistent decline in demand for high-value policies and as customer preferences shifted towards low-margin products.

Value for new business (VNB), the expected profit from new policies, fell 19% to Rs 2,227 crore for the year ended March 31, dragging the VNB margin to 24.6% from 32% a year earlier.

The decline in VNB margin is primarily on account of the shift in the underlying product mix towards unit-linked business, the company said.

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Should you buy, sell or hold ICICI Prudential Life's stock? Here's what analysts say:

Morgan Stanley

Morgan Stanley downgraded ICICI Prudential Life to Equal Weight from Overweight earlier and also slashed the target price to Rs 610 from Rs 660 earlier.

The company reported another quarter with a large miss in VNB margin. It delivered on APE growth, but VNB missed estimate mainly by higher costs.

Higher costs could also be reflected in part in FY25. “The upside to our reduced price target is limited - we move to the sidelines,” said the note.

Motilal Oswal

Domestic brokerage firm Motilal Oswal retained its Buy rating on ICICI Prudential Life with a target price of Rs 700.

"IPRU delivered a weaker-than-expected performance in 4Q. Lower product-level margin remain a concern over the medium term. However, premium growth delivery would be key for valuation re-rating," Motilal said.

"Considering the 4Q performance, we have cut our estimates for APE/VNB margin for FY25 and FY26. We expect IPRU to deliver an 18% CAGR in VNB over FY24-26. Going ahead, strong premium growth and steady VNB margins would drive re-rating of the stock," it said.

Kotak Institutional Equities

Kotak Institutional Equities retained its Buy rating on ICICI Prudential Life with a target price of Rs 685.

"We are revising down our VNB estimates by ~2% to reflect lower margins, our EV forecasts increase by 3-4% reflecting higher investment variance and unwinding rates. We expect the company to deliver mid-teen (similar to industry) growth with flat margins," it said.



JM Financial maintained its Buy rating on ICICI Prudential Life with a target price of Rs 736.

"ICICI Prudential Life reported a very strong 9.6% year-on-year (YoY) growth in 4Q24, coming in on the back of 26.6% YoY growth in 4Q23, driven by one-off in non-par sales in Mar’23. This strong growth has come in from agency and direct channels, while banca was flat YoY as we ICICI Bank’s APE contribution is now stable at INR 0.8-1 bn per month," it said.

"While the company is committed to invest in its channels, we see scope for margin expansion by 2HFY25, led by product mix shift away from ULIPs and opex normalisation at these levels," JM Financial said.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)