JS Research has just released an update on its coverage of Adamjee Insurance (AICL) stock. The research house has reiterated its December 2024 target price to Rs. 68 per share.
The key points from the report are described in the following.
Adamjee Insurance’s investment portfolio value continues to expand, showcasing strength in its Sum-of-the-Parts (SoTP) valuation methodology. Despite a market price of Rs35.79 per share, the equity portfolio value stands significantly higher at Rs61 per share. This valuation considers a 30% discount to market value for listed equities and the cost basis for unlisted investments.
The research reiterates a ‘Buy’ rating on AICL, emphasizing its continued rally at the Pakistan Stock Exchange (PSX). AICL has shown an underperformance of 7% relative to the KSE100 Index in CY24 YTD, offering an attractive entry point for investors. Despite this, AICL’s underlying investments have outperformed the benchmark, creating an opportunity for fresh buying.
The recent market rally has widened the discount between AICL’s market capitalization and its equity portfolio value to 40%. Notably, AICL’s investment in MCB Bank alone equals its total market cap on the exchange.
A breakdown of AICL’s equity investments (excluding Adamjee Life) is illustrated below:
| Company | Weight in SoTP | Equity Portfolio Value (Rs million) |
|---|---|---|
| MCB Bank | 40% | 8,499 |
| Fauji Fertilizers | 5% | 986 |
| Pakgen Power | 6% | 987 |
| Lalpir Power | 3% | 440 |
| Other Investments | 29% | 5,269 |
| Total (ex ALIFE) | – | 46 |
The recent heavy rains and urban flooding in the UAE are expected to impact AICL’s overseas Motor segment, contributing over 35% to the company’s revenue. This adverse weather event is anticipated to increase claims in the coming quarters, affecting AICL’s underwriting results. The overseas Motor segment has been under pressure, with underwriting losses recorded for six consecutive quarters prior to a recent turnaround in 1QCY24.
The information in this article is based on research by JS Research. All efforts have been made to ensure the data represented in this article is as per the research report. This report should not be considered investment advice. Readers are encouraged to consult a qualified financial advisor before making any investment decisions.
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