Anil Singhvi picks New India Assurance as his SIP Stock of the day, Know the reason WHY
Zee Business Managing Editor Anil Singhvi said that sometimes market participants are ignorant of good quality stocks and miss out on money-making opportunities. Often, the market participants argue what is new in this stock, he said pointing out that they forget the intrinsic value in the stock. Singhvi said New India Assurance is exactly that kind of a stock
Zee Business Managing Editor Anil Singhvi said that sometimes market participants are ignorant of good quality stocks and miss out on money-making opportunities. Often, the market participants argue what is new in this stock, he said pointing out that they forget the intrinsic value in the stock. Singhvi said New India Assurance is exactly that kind of a stock. The Market Guru said that one needs to invest for the next generation. Insurance is the theme for next 20 to 25 years.
Singhvi said that compared to developed countries, life insurance is also nicely covered in India. In the US, there is insurance for everything, General Insurance is there for many things in the US. Singhvi said that slowly and steadily, Insurance penetration is increasing in India.
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Singhvi said that they have cash and investments in the company's books are worth Rs 150, indicating that at current market price the share is available for free. The company will do EPS of Rs 12, Rs 16 in FY23 and Rs 20 in FY24. The stock is available at P/E multiple of Rs 10. The valuations are extremely cheap compared to other listed insurance companies. Major companies are available at P/E multiple of 25 – 30. New India Assurance is available at 1/3rd valuation at this stage.
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Singhvi said that LIC had invested in New India Assurance IPO in 2017, they bought 7.14 cr shares, which after 1:1 bonus issue currently holds 14.28cr shares, whose buy price is 490 per share. LIC when it sells any shares, they do consider interest for the period invested. Generally, LIC will never sell at their cost price.
Singhvi said that the Government will privatise at least 1 Insurance company; this will lead to rerating in the Insurance sector. Singhvi expects a dividend of Rs 10 going forward, indicating that the stock is available at throw away price. Singhvi sees top line growth of 25% and bottom-line growth of 40%. Singhvi said Investors should hold this stock for 2-3 years and the stock will generate strong returns. Singhvi said he expects a minimum target price of Rs 250 – 300 on the stock.
Ashish Chaturvedi, Research Analyst at Zee Business said that New India Assurance was formed as early as 1919, that is over 100 years ago, the company has been market leader in India in Non-life insurance business for more than 50 years with currently operating in more than 28 countries and have now presence in across all territories in India with its 2200+ offices.
Ashish said that the Company's revenue grew at a CAGR of 18% in Past 5 years. Company is valued very attractively, valued at PE of 16, Price to book of just 1.1, company is completely debt Free and have been rated as AAA/Stable by CRISIL since 2014. Mutual Funds holds as high as 13.2% stake in the company, Interesting is LIC which holds as high as 8.67% stake.
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