The Suncorp Group Ltd (ASX: SUN) share price could be great value at the current level.
That's the view of one of Australia's leading brokers, which has just reiterated its bullish view on the insurance giant.
What is the broker saying about the Suncorp share price?
According to a note out of Morgans, in response to yesterday's natural hazards update, its analysts have retained their add rating and $13.70 price target on the company's shares.
Based on the latest Suncorp share price of $11.68, this implies potential upside of 17% for investors over the next 12 months.
Morgans is also expecting an attractive fully franked 6.3% dividend yield over the next 12 months, stretching the total potential return beyond 23%.
What did its analysts say?
The broker notes that it has been "an active start to the year for claims" for Suncorp given the recent inclement weather. This has led to first half hazard claims reaching $500 million, which has eaten up most of its first half natural hazard budget of $580 million.
However, it reminds investors that if the bad weather continues, Suncorp has strong reinsurance protections in place that will work to limit hazard losses in the second half. It commented:
We now forecast SUN hazard losses to be A$75m above allowances in 1H23, but assume this drag is offset by claims being below budget by a similar level in 2H23, due to reinsurance protections in place.
In light of this, the broker remains positive and believes the Suncorp share price trades on an undemanding valuation. It concludes:
While weather remains volatile, we think SUN's underlying business trends continue to broadly track in the right direction. SUN will also reap the full benefits of its efficiency program in FY23 and we see SUN's current valuation as undemanding, e.g. FY23 PE multiple of 13x and a 6% dividend yield.
