Industry leaders Results Update – LIC and Cummins

[vc_row type=”in_container” full_screen_row_position=”middle” column_margin=”default” column_direction=”default” column_direction_tablet=”default” column_direction_phone=”default” scene_position=”center” text_color=”dark” text_align=”left” row_border_radius=”none” row_border_radius_applies=”bg” overflow=”visible” overlay_strength=”0.3″ gradient_direction=”left_to_right” shape_divider_position=”bottom” bg_image_animation=”none”][vc_column column_padding=”no-extra-padding” column_padding_tablet=”inherit” column_padding_phone=”inherit” column_padding_position=”all” column_element_spacing=”default” background_color_opacity=”1″ background_hover_color_opacity=”1″ column_shadow=”none” column_border_radius=”none” column_link_target=”_self” column_position=”default” gradient_direction=”left_to_right” overlay_strength=”0.3″ width=”1/1″ tablet_width_inherit=”default” tablet_text_alignment=”default” phone_text_alignment=”default” animation_type=”default” bg_image_animation=”none” border_type=”simple” column_border_width=”none” column_border_style=”solid”][vc_column_text css=”.vc_custom_1685040349307{margin-right: 16px !important;margin-left: 16px !important;border-right-width: 10px !important;border-left-width: 10px !important;}”]This week saw some of the large companies declare their results. We take a look at two companies, which are market leaders in their respective segments. The first is LIC which continues to be the leader in the life insurance industry in India. The other one is Cummins, a leader in industrial machinery in India. Results for both are key to benchmarking the industry performance and expectations from other industry players.

LIC – Insures its leadership in FY23 with a strong premium

Ever since its listing last year, the stock has been on a decline and many investors who got allotment during the IPO are staring at a negative return. LIC is also faced with heavy competition from new private insurance companies and the FY23 results brought some solace to investors.

FY23 Highlights

• Maintains market leadership with 62.58% market share.
• Value of New Business grows YoY by 16.46% to Rs 11,553 crore.
• VNB margin (Net) increased by 110 bps to 16.2%, the highest since listing.
• AUM increased by 7.65% YoY to Rs 43.97 lakh crore.
• Profit After Tax at Rs 36,397 crore, a six times growth over FY22.
• 2.04 crore policies sold in the individual segment during FY23.

Management Speak

Shri Siddhartha Mohanty, Chairperson, LIC said, “Our results demonstrate the resilience of our business, built in every nook and corner of the country, over more than six decades. Our efforts towards enhancing the share of nonpar products in the overall product mix are bearing fruits. With the increase in profit, net VNB margin, and IEV we are well-positioned to continue our growth journey, in the service of the nation and its citizens. The regulatory initiatives towards Insurance for All by 2047 will present opportunities to grow for the sector and we intend to participate in that growth. As we move forward to grow our business further, we will endeavour to create superior value for all our stakeholders. Finally, we thank all our policyholders, agents, employees, and shareholders for maintaining their faith in us”.

Our Take

LIC is a well established and well entrenched player in the insurance space. It derives strength from the network of agents who contribute to nearly 90% of its sales. The company is also taking initiatives to make sure its digital presence and digital transactions are enhanced in future. The stock has risen about 25% from its all time low two months ago and the FY23 results could push the stock closer to its listing price over the next few months. 

Cummins India – A resounding FY23 firing on all cylinders

Cummins India is a manufacturer of engines that are used across industries including railways, generators, mining, construction etc. The stock had a good run over the last one year returning close to 60% to investors. The Q4 and FY23 results didn’t disappoint investors as the company reported its highest ever annual net profits in FY23.

Standalone FY23 Highlights

• Total Sales for FY23 stood at Rs 7,612 crore rising 26% compared to FY22.
• Domestic sales at Rs 5,562 crore rising by 26% compared to FY22.
• Exports Sales at Rs 2,050 crore rising by 27% compared to FY22.
• Profit before exceptions item and tax at Rs 1,506 crore is higher by 46% compared to FY22.
• Profit after tax at Rs 1,130 crore is higher by 27% compared to FY22.

Management Speak

Ashwath Ram, Managing Director, Cummins India, said: “The Indian economy continues to be resilient amidst inflationary economic conditions, rising interest rates, and ongoing geo-political crises. Fiscal and monetary policy measures are conducive to sustaining the economic growth rate. With softening commodity prices, stable consumption provides optimism for sustaining the economic growth rate of the Indian economy. Government spending on infrastructure promotes various segments, resulting in better capacity utilization and early signs of private capex. Global end markets for export held up well for the year, while monetary policy actions by various central banks around the world to contain inflation may pose a challenge to consumption in the near term”.

Our Take

FY23 saw the company post its highest ever profits. These were driven by strong domestic as well as export demand. The management is however cautiously optimistic about the next few quarters given that emission norms will change soon.

The CPCB IV+ norms will become effective from July 1, 2023, for gensets up to 800 kW. The company is ready with its products to meet the new emissions norms. The management said that the company is well positioned to tackle any challenges with its strong balance sheet and prudent investments in technology, considering the uncertainty, it will not provide any guidance for FY24 at this time. The stock had a stellar run over the last few months, however given some of the challenges as enlisted by the management, the stock may not deliver similar returns in FY24 as it did in FY23.

ABOUT THE AUTHOR

Ketan Sonalkar (SEBI Rgn No INA000011255 )

Ketan Sonalkar is a certified SEBI registered investment advisor and head of research at Univest. He is one of the finest financial trainers, with a track record of having trained more than 2000 people in offline and online models. He serves as a consultant advisor to leading fintech and financial data firms. He has over 15 years of working experience in the finance field. He runs Advisory Services for Direct Equities and Personal Finance Transformation.

Note – This channel is for educational and training purpose only & any stock mentioned here should not be taken as a tip/recommendation/advice

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