HDFC Securities' research report on Max Financial
Protection (4QFY20) grew 50.8% YoY to Rs 1.8bn and its share rose 571bps YoY to 13.1%. For FY20, protection grew 41.7% YoY, contributing 13.8% to total APE. Limited pay protection is driving higher protection sales. NPAR savings contribution to total APE increased 97bps YoY to 14.1% while contribution of PAR (-360bps, 32.4%) and ULIP (-146bps, 42.4%) declined. Management expects NPAR savings contribution to increase as customer risk appetite is low. Company stated that given the yield curve, it planned to increase the duration of the NPAR savings product to 8 years.
We have increased our VNB estimates for FY20/21E by 18.4/15.6%, and fine tuned our DCF assumptions, resulting in a 10.7% increase in TP to Rs 620. Key risks: Lower growth, higher cost over-runs, supply overhang due to promoter pledges, and any hurdles in deal.
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