Buy Max Financial; target of Rs 577: HDFC Securities

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HDFC Securities' research report on Max Financial

While 1QFY19 total APE grew 17% YoY to Rs 5.6bn post over-run VNB margins increased only 10bps YoY to 18.1%. Margin was dragged lower as 1Q is a seasonally slower qtr (~15% of annual premiums), product mix changed (300bps YoY improvement in protection offset by a 1300bps interchange from PAR to linked), and costs rose as a result of higher investments in proprietary channel and higher acquisition operating costs.

Outlook

MAXL  is  also  open  to  evaluate  any acquisition candidates. We have tweaked our APE growth assumptions as a result of which our target price increases to Rs 577 (FY20 EV + 26.5x FY20E adj. VNB).

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