Shares of ICICI Prudential Life Insurance Company (ICICI Pru) rallied 7% to Rs 408 on the BSE on Thursday in an otherwise subdued market, after reporting 27% year-on-year (YoY) growth in value of new business (VNB) at Rs 309 crore in the June quarter (Q1FY20). The stock was 5% away from its 52-week high level of Rs 428 touched on August 7, 2018 in intra-day trade.

The life insurance company's VNB margin during the quarter expanded 400 basis points (bps) to 21% from 17% in Q1FY19, primarily on account of increase in protection mix.

The company's profit after tax during the quarter remained flat at Rs 285 crore against Rs 282 crore in the corresponding quarter of previous fiscal.

"The management reiterated its target of doubling VNB in the next 3-4 years. With the sustained weakness in savings premium growth the improvement in the other 3Ps (Protection, Persistency and Productivity) remains key to achieving this target. The robust margin expansion led by very strong increase in share of protection in the product mix, improving productivity, and stable persistency has ensured that the company is well on track to double its VNB over the next 3-4 years," analysts at SBICAP Securities said in result review.

The brokerage firm reiterates 'buy' rating on ICICI Pru with the increased 12-month target price of Rs 500. The current valuation looks unfair for a strong franchise like ICICI Pru with good VNB growth outlook over the medium term. The current valuation seems to be ignoring the improvement in profitability and a likely revival in growth, it said.