ICICI Lombard shares slump 15% to 52-week low after weak Q1 results trigger brokerage downgrades
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ICICI Lombard General Insurance shares fell nearly 15% to a 52-week low after reporting a 46% year-on-year drop in net profit for Q1, leading to multiple brokerages downgrading the stock. While Motilal Oswal and HSBC reduced their target prices and ratings, Macquarie maintained an outperform rating, citing the impact of recent headwinds on profitability. The overall sentiment remains cautious amid competitive pressures and uncertain earnings outlook.
ICICI Lombard General Insurance shares slumped nearly 15 per cent on Thursday and hit a fresh 52-week low after the insurer reported weak June quarter earnings and several brokerages downgraded the stock.
The stock traded 12 per cent lower at around ₹1,600 at 9.54 am after falling to a 52-week low of ₹1,544.60, compared with the previous close of ₹1,814.60.
The decline came after the company reported a 46 per cent y-o-y fall in net profit to ₹403.17 crore for the first quarter of the current fiscal year. The insurer said earnings were impacted by a ₹165 crore increase in claim reserves in its motor third-party portfolio.
Domestic brokerage Motilal Oswal also downgraded the stock to neutral from buy and reduced its target price to ₹1,960 from ₹2,210.
According to Motilal Oswal, ICICI Lombard’s growth trajectory has improved due to a recovery in motor insurance following GST cuts and strong market share gains in retail health supported by GST exemption.
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The brokerage said the retail health segment continued to witness strong momentum, led by traction in the company’s Elevate product. It added that competitive intensity remained high in the motor own-damage segment and that the company had adopted a conservative reserving approach following the Supreme Court judgment, which impacted claims during the quarter.
Motilal Oswal said it maintained its net earned premium estimates but cut its profit after tax estimates by 14 per cent and 11 per cent for FY27 and FY28, respectively, while increasing combined ratio estimates by 80 basis points and 20 basis points following the first-quarter performance. The brokerage said visibility on factors that could offset higher combined ratios remained weak.
HSBC downgraded the stock to hold from buy and cut its target price to ₹1,880 from ₹2,200.
Citi maintained its sell rating and raised its target price to ₹1,755 from ₹1,735. The brokerage said the weak quarter could lead to a multi-year de-rating and highlighted structural challenges in the multi-line non-life insurance space.
Citi also pointed to sustained competitive pressure from new entrants, gradually declining distribution and service advantages, and a lack of meaningful rationale for price hikes in the motor third-party segment.
Meanwhile, Morgan Stanley maintained its equal-weight rating with a target price of ₹1,920. The brokerage described the June quarter as weak and said the earnings outlook remained uncertain.
According to Morgan Stanley, two large losses in the fire segment and the adverse Supreme Court judgment resulted in prudent reserve creation, hurting profitability. It added that the court ruling could have further material implications and that core results were also muted.
Macquarie maintained its outperform rating with a target price of ₹2,430. The brokerage said multiple headwinds had converged during the quarter, with fire losses and the court judgment weighing on earnings. It added that conservative reserves offered protection as competition intensified.
Original Article
Published on Hindu BusinessLine