Recommendations General Insurance & Specialty Retail Sectors

The scrips in this column have been recommended with a 15-day investment horizon in mind and carry high risk. Therefore, investors are advised to take into account their risk appetite before investing, as fundamentals may or may not back the recommendations.

ICICIGI 
CMP - Rs 726 
BSE CODE 540716 
Volume 128,643 
Face Value Rs 10 
Target Rs 802 Stoploss Rs 670 

 

A general insurance company promoted by ICICI Bank which got listed on September 2017, ICICI General Insurance is the fourth largest player in the market. The company has been assigned iAAA rating, i.e. fundamentally strong company, by ICRA for its highest claim paying ability. The company’s major product mix includes Motor OD (Own Damage) 25%, Motor TP (Third Party) 18%, Health & PA 19%, Crop 19%, Fire 7%, Marine 3% in FY18. Meanwhile, the company also witnessed a policy count growth of 32.5%. During FY18, the gross written premium and gross direct premium Income posted growth of 15% and 15.2%, respectively. Its PAT grew 22.8% while the return on average equity stood at 20.8% as against 20.3% in FY17. Its focus on comparatively profitable segments, higher policy penetration in motor, change in product mix under health, geographic diversification covering higher farmers under crop insurance, value-added services in property and business transition to digitisation have paved the way for growth of the company. With expected steady growth in industry and GDPI and the company’s leadership position, we recommend Buy in the scrip.

TRENT
CMP - Rs 329
BSE CODE 500251
Volume 905,592
Face Value Rs 1
Target Rs 355
Stoploss Rs303



Trent, promoted by Tata Sons, runs a chain of retail stores in India, chiefly under the Westside brand. The company stores deal in three formats, viz; Westside for apparels, accessories and home décor, Star for food and beverages and, lastly, Landmark for toys, books and sports merchandise. Lately, Trent is mulling on launching 30 stores every year over the next 5 years and plans to penetrate higher into the East by starting 10 Westside stores in FY19. This is because the company posted 19% standalone revenue growth in FY18 driven by higher like-to-like (LTL) sales at 9% in FY18 and 17 Westside store additions in a year. Under the Star brand, the company is transitioning to Star Market (5000-15000 sq ft) by closing Star Dailies (<5000 sq ft) targeting fewer stores with large coverage. Further, the underpenetration of organised players in food and beverages provides opportunities. Therefore, higher geographical penetration with better product mix through addition of mid-sized stores including newly acquired Zudio and restructuring of loss-making Landmark brand, we expect consistent topline and bottomline growth up to FY20E. We recommend a BUY in the scrip.