Buy MAX Financial Services; target of Rs 830: Motilal Oswal

Motilal Oswal is bullish on MAX Financial Services has recommended buy rating on the stock with a target price of Rs 830 in its research report dated January 25, 2021.

Broker Research

February 03, 2021 / 17:26 IST

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Motilal Oswal's research report on MAX Financial Services

MAX Life Insurance (MAXLIFE) has demonstrated resilient performance amid a difficult macro environment, delivering 10% YTD growth in new business APE v/s a 3% decline for private peers, led by a shift in product mix towards Protection and Non-PAR segments. n The management has increased its focus on the Protection and Non-PAR segments, with their share increasing to ~31% in FY20 from ~16% in FY17. Both these segments would continue to deliver better than industry trends. n It has made significant investments towards growing its own distribution network – branch/employee count has increased by ~190/~5,600 over FY17-20. Market share in Individual APE has risen to 6.2% in FY21 YTD from 3.7% in FY14. n MAXLIFE has one of the most productive agency channels, with agent productivity improved to INR250k in FY20 (vs INR150k in FY17). The proprietary channel accounted for 32% to total APE. The deal with Axis Bank (AXSB) would create a strategic partnership and increase visibility for long-term business growth via higher cross-sell opportunities. The proposal has received RBI’s approval and is now awaiting IRDAI’s clearance. n The stock has delivered a 35% return over the past one-year. Given its strong business performance and likely partnership with AXSB, we expect the re-rating to continue in the stock. We overall expect growth in new business premium (NBP) to sustain at 15% CAGR over FY20-23E, while VNB margin remains steady ~23.5%. This would enable 18% VNB CAGR over FY20-23E, while operating RoEV sustains ~20%. The stock currently trades at 2.3x FY23EV and ~14xFY23 EVOP. We initiate coverage on the stock with a BUY rating and TP of INR830 (2.8x FY23E EV).

Outlook

We initiate coverage on the stock with a BUY rating and TP of INR830 (2.8x FY23E EV).

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