Accumulate Max Financial Services; target of Rs 680: Prabhudas Lilladher

Prabhudas Lilladher's research report on Max Financial Services

Max Life’s overall APE grew by 10% YoY/74% QoQ in Q2FY21 improving the H1FY21 growth to 5% YoY. This was led by a good 7% YoY growth in FYP, group also has strong growth of 43% YoY. Highlight for the quarter was strong margin improvement of 1100bps QoQ to 28.2% from a suppressed 17% in Q1FY21. MAXLI under took a pricing increase in Jul’20, while strong growth in protection & non-par savings led to delta in margins, ending at 24.2% in H1FY21. We estimate sustained margins levels of 23-24% at current juncture and have not changed our long term margins assumptions of 23% as mix could tilt back from non-par savings. On the deal front, RBI is believed to have not agreed to Axis bank acquiring stake in Max life and hence revised deal is to acquire 6% through capital market subs and 9% through bank. Investment comes under automatic route for bank, while Max Life will have to go to IRDAI for approvals.

Outlook

We retain ACCUMULATE with revised TP of Rs680 (Rs651) valuing Max Life based on 2.4x Sep-22 EV.

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