Prabhudas Lilladher's research report on Max Financial Services
Max Financial Services got a much awaited regulatory approval for acquisition of stake in Max Life by Axis Bank and its capital market subsidiaries. Axis bank & subs will together acquire 12% stake and have a right to acquire additional 7% stake over one or more tranches which it intends to do over next few years. Deal approval ends uncertainty on Axis & Max Life partnership, which has been a major driver of growth. Max Life has consistently delivered on APE growth throughout the pandemic led by protection & non-par savings mix improvement coupled with sharp VNB rise of 37% YoY in 9MFY21 with near to industry leading margins of ~26%. We believe there is further room for improving protection mix (16% currently) with higher retail share (10% currently) and gradually move towards long term margins of 26-28%. We eliminate regulatory risk discount while we retain holdco discount of 10% (from 25%).
We increase VNB/VNB margins and growth estimate leading to increase in multiple to 2.8x (from 2.4x) FY23E EV with revised TP of Rs995 (from Rs760). Retain Accumulate.
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