Bangalore based JainMatrix Investments has come up with its report on ICICI Prudential IPO. While most of the analysts at brokerage houses are advising investors to subscribe to ICICI Prudential IPO, JainMatrix Investments have revealed that a cautious approach is required. Noting the novelty of the first insurance IPO, analysts at the research house believe the offer is good but from a three year perspective.
The full report is available further down the text, here are key takeaways:
ICICI Prudential (IPRU) has made impressive strides with ecommerce and strong sales network, improving productivity and proactive customer service.
IPRU’s revenue and PAT have grown 8.07% and 4.5% CAGR from FY12 to FY16.
The revenue growth is moderate, and profit margins fell until FY16.
The EPS growth has been slow from FY12 to FY16. From the Q1FY17 data, financials are not good. However in reality, Q4 of every year is the best for insurance, as customers focus on tax savings.
The dividend has been rising over the years. IPRU paid a dividend of Rs 8.4 in FY16, a yield of 2.51%. This is a positive for investors as it is the highest in the industry.
IPRU has been able to generate Free Cash Flow for 3 of the last 5 years. This is a positive.
IPRU has a ROE of 31.2% (FY16) making it the best in the industry.
The cash per share including Reserves & Surplus and Cash in balance sheet as on June 2016 is Rs 29/share. So the current operations of IPRU are available at (334-29) = Rs 305/share. (At UMP).
However there are a few risks:
Changes in the regulatory environment
IPRU is subject to claims by the customers and/or regulators for mis-selling.
High valuations make this IPO attractive only for long tern investors. It is rated a low risk, medium return type of offering.
Opinion: Investors may BUY IPRU with a 3 year perspective.