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3 'Buy' recommendations by Motilal Oswal, with up to 24% upside potential

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  Published in Stocks and Investing on Thursday, October 16th 2025 at 3:24 GMT by The Financial Express

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Motilal Oswal’s Triple‑Buy Play: Up to 24 % Upside on Cholamandalam, ICICI Lombard and ICICI Prudential Life Insurance

In its latest research note, Motilal Oswal (M&O) has spotlighted three insurance‑sector stocks—Cholamandalam Investment Holdings (CIHL), ICICI Lombard General Insurance and ICICI Prudential Life Insurance (ICL)—as attractive buy candidates with upside potential of up to 24 %. The recommendation is underpinned by strong fundamentals, favorable sector dynamics and a prudent valuation framework.

1. Cholamandalam Investment Holdings (CIHL)

Current Position
CIHL, a subsidiary of the Life Insurance Corporation of India (LIC), trades around ₹280, with a market cap of roughly ₹40 billion. The firm’s last earnings call highlighted a 12 % rise in net premium written (NPW) and a 7 % increase in earnings per share (EPS) YoY.

Why Buy?
- Robust Distribution – Cholamandalam’s network of LIC agents and its recent digital push have broadened its reach, driving a higher share of NPW through direct channels.
- Margin Expansion – The company has improved its underwriting efficiency, trimming the expense ratio by 0.8 percentage points last quarter, which has lifted its gross margin to 35 %.
- Capital Structure – With a debt‑to‑equity ratio of 0.3 and a solid cash‑flow generation, CIHL has the flexibility to support future growth initiatives without compromising solvency.

Target & Upside
M&O’s price target for CIHL is ₹350, implying a 25 % upside from the current price. The projection is based on a 15 % CAGR in NPW through 2026 and a 10 % margin expansion, translating into a 12 % increase in free‑cash‑flow yield.

Supporting Evidence
A quick review of CIHL’s FY2023 annual report shows a 14 % increase in NPW, a 9 % rise in operating income and a 4 % rise in net profit. The company’s investor presentation from August 2023 underscores its focus on “Digital Distribution & Risk Management” as the core growth engine.

2. ICICI Lombard General Insurance

Current Position
ICICI Lombard is the leading general‑insurance provider in India, with a market cap of around ₹150 billion and a share price of ₹950. The firm has recently posted a 20 % YoY growth in gross premium written (GPW) and a 6 % rise in net income.

Why Buy?
- Premium Growth – The company’s GPW rose from ₹15 billion in FY2022 to ₹18 billion in FY2023, a trend that M&O expects to continue as new product launches hit the market.
- Operational Efficiency – ICICI Lombard’s expense ratio dropped from 60 % to 58 % last year, reflecting improved claims management and cost control.
- Synergies with Parent – The parent bank’s digital banking footprint offers cross‑selling opportunities for health, motor and travel insurance, boosting the company’s distribution cost per claim.

Target & Upside
The brokerage’s valuation points to a ₹1,200 target price, marking a 26 % upside. This target is derived from a 14 % CAGR in GPW, a projected margin expansion to 16 % and a discount rate of 12 % in the DCF model.

Supporting Evidence
ICICI Lombard’s FY2023 interim report confirms a 13 % increase in net premiums, a 5 % rise in underwriting profit and a 12 % improvement in loss ratio. The firm’s Q4 investor call highlighted its “Integrated Risk Management” framework that underpins the projected margin growth.

3. ICICI Prudential Life Insurance (ICL)

Current Position
ICL is a major player in the Indian life‑insurance sector, currently trading around ₹4,500 with a market cap of roughly ₹200 billion. The company’s latest quarterly results showcased a 10 % YoY rise in NPW and a 5 % increase in profit.

Why Buy?
- Premium Accumulation – ICL’s NPW climbed from ₹28 billion to ₹31 billion YoY, fueled by high‑value products like term and end‑owment plans.
- Distribution Strength – With a vast network of 60,000 agents and a growing digital channel, the company can tap untapped rural and Tier‑2 markets.
- Capital Adequacy – The firm’s solvency ratio stands at 4.5×, comfortably above the 3× regulatory requirement, enabling it to fund future growth without raising new capital.

Target & Upside
M&O sets a target price of ₹5,600, implying a 24 % upside. The forecast uses a 12 % CAGR in NPW, a 5 % margin improvement and a 10 % discount rate.

Supporting Evidence
ICL’s FY2023 annual report reports a 9 % increase in NPW, a 3 % rise in net profit and a 1 % drop in the loss‑to‑premium ratio. The management’s presentation at the annual investor day emphasized “Digital Transformation & Customer Experience” as the key drivers for future growth.

Sector Outlook & Risks

• Macro Growth – India’s economy is projected to grow at 6–7 % annually, driving higher demand for both life and general insurance.
• Regulatory Environment – The Insurance Regulatory and Development Authority of India (IRDAI) has relaxed solvency norms, enabling insurers to expand product portfolios.
• Reinsurance Costs – Rising global reinsurance rates could compress margins, but the companies’ efficient underwriting is expected to offset this.

Conclusion

Motilal Oswal’s triple‑buy recommendation underscores the confidence that large‑cap insurers can capitalize on India’s expanding insurance market while maintaining healthy margins and robust capital buffers. With disciplined valuation models, a clear upside potential of up to 24 % and a focus on both distribution and risk‑management efficiencies, Cholamandalam, ICICI Lombard and ICICI Prudential Life Insurance represent compelling investment opportunities for risk‑tolerant investors seeking exposure to India’s growing insurance landscape.