Emkay Global Financial's report on Max Financial
MAXL management remains firm over the rising share of Protection plans, with increasing focus on proprietary channel of distribution (~31% 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 ~57%. We are building in improvement in margin profile for MAXL, with a gradual rise in share of protection plans along with elevated share of Non-Par savings. However, the management needs to re-price its existing protection plans amid a rise in pricing for reinsurance. We expect VNB margins to improve to ~22.6% by FY22E against ~21.6% during FY20. 13M persistency for MAXL remained stable at ~83%, whereas 61M declined by 100bps yoy to ~52%. However, the data does not include the impact of Covid-19 lockdowns post March’20 and hence, the numbers are least relevant. The solvency ratio fell to ~207% because of a dip in equity markets but still remains in a comfortable range.
We assume coverage on Max Life (MAXL) with a Buy rating (OW in Insurance EAP) and a revised TP of Rs531 at 1x March’22E EV (earlier Rs600 at 1x Sep’21E EV). MAXL has reported a sharp decline in APE by ~15% yoy during Q4FY20, affected by lockdowns; however, the company managed to maintain its market share at 10%.
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