Buy Max Financial Services; target of Rs 518: Prabhudas Lilladher

Prabhudas Lilladher's research report on Max Financial Services

Max Life's overall APE grew 5% YoY supported by decent growth in single & regular premiums. Protection segment remains the key focus with shift of Product mix to NPar savings continuing. Margins remained stable YoY at 21.6% for FY20 (but improved sequentially to 22.8% in 4Q20) on account of support from NPar growth. Persistency has improved across all buckets except the 61m persistency (upto Mar'20 i.e.11m) being affected by the ULIP segment.

Outlook

We retain BUY with revised TP of Rs518 (Rs610) valuing Max Life based on 2.3x Mar-22 EV (from 2.6x Sep-22 EV), we reduce Holdco discount at 35% on clarity on certain aspects like Axis JV, merger and rationalizing ownership structure but we need approvals to come through to get more constructive on reducing the holdco discount further.

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