Emkay Global Financial is bullish on Max Financial has recommended buy rating on the stock with a target price of Rs 660 in its research report dated July 31, 2020.
Emkay Global Financial's report on Max Financial
MAX Life (MAXL) reported a 2.8% fall in APE (lower than peers) to Rs6.6bn, whereas VNB declined by ~15.7% yoy. The performance was relatively better than most peers and in sync with monthly data trends. Renewals grew at a slower pace of ~6% yoy to Rs18.5bn. VNB margins disappointed, falling 250bps yoy to 17.1%, as a rise in reinsurance charges was absorbed by MAXL in order to maintain growth momentum. However, it has introduced new products at increased prices, supporting margins and profitability going ahead. Management remains firm over the rising share of protection plans with an increasing focus on a proprietary channel of distribution (~37% of distribution). With Axis Bank acquiring a 30% stake in the insurance company, product diversification is likely to sail through more comfortably. Axis’ share in total bancassurance remains healthy at ~56%.
Outlook
We are building in improvement in the margin profile for MAXL, with a gradual rise in the share of protection plans. We continue to like MAXL for its diversified product profile and comfortable valuations. We introduce FY23 estimates and roll forward to Sept’22E. We retain Buy and OW in EAP, with a revised TP of Rs660 (1.2x Sept’22E EV).
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