Sharekhan is bullish on Max Financial Services has recommended buy rating on the stock with a target price of Rs 665 in its research report dated July 30, 2020.
Sharekhan's research repor on Max Financial Services
Max Financial Services (MFS) posted strong numbers for Q1 FY2021, with better-thanexpected operating performance, and an encouraging EV growth with market share gain despite the impaired collections because of the lockdown is notable. Max Life Insurance (MLIC, MFS has 72.5% shareholding) saw gross written premium (GWP) rise by 4% y-o-y, despite the lockdown, which impacted a major part of Q1FY21, which we believe is impressive. New business premiums (on an APE basis) amounted to Rs 661 crore, down 4% y-o-y which indicates better than expected traction. Market share for new business (on APE basis) saw increase to 10.7% from 9.7% in FY20. Despite all COVID-19 challenges, Max life outperformed industry and gained more than 217 BPS share from FY20 in private market. Also, the individual sum assured of new business clocked a 39% growth in Q1FY21 due to strong growth in protection business that was also encouraging. The 13th-month persistency ratio for Q1 FY2021 was stable at 82% (as compared to 83% in FY2020), which indicates good customer retention and effective client communication. Claims paid ratio stood at 99.22% at the end of FY20, one of the best in the industry and best-ever ratios reached.
Outlook
We believe strong business fundamentals and current valuations (at a significant discount to peers) make risk-return favourable for MFS. We maintain our Buy rating on the stock with a revised price target (PT) of Rs. 665.
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