MBSB Investment Bank Bhd (MBSB Research) has maintained its NEUTRAL call on LPI Capital Bhd while cutting its target price to RM14.54 from RM15.42, citing rising claims and weaker investment income as near-term earnings headwinds despite the insurer’s strong dividend appeal.
MBSB Research said LPI’s 6MFY26 core net profit fell 8% year-on-year to RM166 million, coming in below both its and street expectations at 42% of full-year forecasts. The weaker performance was driven by higher insurance and reinsurance expenses alongside softer investment income, which offset a 3% increase in insurance revenue.
The research house said motor claims remained a key concern, with the group’s six-month combined ratio rising to 77% from 76.4% a year earlier. Logistical disruptions and higher costs for overseas-manufactured motor parts are expected to keep claims elevated in the near term.
Despite the pressure, gross written premiums grew 4% to RM1.07 billion, supported by strong momentum in the Fire segment which recorded 12% year-on-year growth.
LPI declared a 90 sen dividend for 6MFY26, comprising a 25 sen regular dividend and a 65 sen special dividend, translating into a 215% payout ratio. MBSB Research expects another 65 sen special dividend in 4QFY26, helping support the stock’s valuation.
The research house cut its FY26 core profit forecast by 6% to reflect higher claims and revised its dividend assumptions, with part of the RM737 million special dividend payout now expected in 1HFY27.
MBSB Research said LPI remains a defensive pick given its dividend yield, but maintained NEUTRAL with the lower target price based on a revised FY27 price-to-book valuation of 1.96 times.
As of 10.44 am, the stock price gained 0.27% to RM15.12.
