Whalesbook
Jefferies Bullish on Indian Financials
International brokerage firm Jefferies has recommended 'Buy' ratings for three prominent Indian companies: ICICI Prudential Life Insurance, ICICI Lombard General Insurance, and Groww. The firm sees significant upside potential, estimating gains of up to 27% for select stocks, driven by improving earnings visibility and strategic business shifts.
ICICI Prudential Life Insurance: Profitability Focus
Jefferies reiterated its 'Buy' rating on ICICI Prudential Life Insurance Company, setting a target price of ₹820. This indicates a potential 20% increase from current levels. The brokerage highlighted the company's strong December quarter profitability, with Value of New Business (VNB) growing 19% year-on-year to ₹600 crore. Margins stood at 24%, slightly exceeding estimates.
Despite headwinds from Goods and Services Tax (GST) changes, ICICI Prudential managed to offset these impacts. This was achieved through a better product mix, benefits from the yield curve, and stringent cost controls. Retail protection saw a substantial 41% year-on-year growth, boosted by GST relief, while non-linked savings products rose 15% due to demand for guaranteed offerings.
However, persistency ratios, particularly the 13-month ratio, remained a concern, with prolonged weakness potentially impacting embedded value. Jefferies has revised its VNB estimates upward by 3-4%, projecting a 16% compound annual growth rate between FY26 and FY28, which could drive stock re-rating.
ICICI Lombard General Insurance: Growth Recovery Expected
A 'Buy' rating was also maintained for ICICI Lombard General Insurance, with a target price of ₹2,400, suggesting an approximate 27% upside. The December quarter results were largely in line, even after accounting for one-off labor code-related costs. Earnings Per Share (EPS) for the quarter, adjusted for ₹531 million in one-off expenses, came in 4% below Jefferies' projections.
Profitability was impacted by higher loss ratios, notably in the motor insurance segment. Conversely, retail health insurance demonstrated robust growth, with premiums surging 86% year-on-year following GST exemptions. This positive momentum is expected to continue.
Jefferies anticipates an improvement in financial year 2027. This outlook is supported by a more benign base, reduced competition from public sector insurers, and ongoing GST tailwinds in health insurance, which should drive premium growth and a potential stock re-rating.
Groww: Diversification Drives Upside
Jefferies initiated a 'Buy' call on Groww, targeting a price of ₹195, reflecting a potential 20% gain. The brokerage's December quarter assessment noted that revenue and adjusted Profit After Tax (PAT) exceeded expectations by 12% and 14%, respectively. This beat was primarily led by stronger-than-anticipated revenues from commodity trading and margin trading facilities (MTF).
New ventures such as commodities, margin funding, and wealth management are now making significant contributions to the company's performance. While cash equity order volumes remained muted and wealth management revenue growth slowed from previous run-rates, Jefferies remains optimistic. The firm forecasts revenue and PAT to grow at 30% and 35% respectively over FY26-FY28, underpinned by long-term growth drivers.
These recommendations underscore Jefferies' focus on companies demonstrating strong earnings visibility, favorable margin trends, and successful business diversification, viewing these factors as more critical than short-term market fluctuations.