Buy Max Financial; target of Rs 665: HDFC Securities

HDFC Securities's research report on Max Financial

New  Business  Premium  and  Individual  APE grew at a better than expected 23.8%  YoY and 27.6% YoY respectively. For FY18, VNB margin improved 140bps to  20.2%  as  a  result  of  higher  share  of protection business, higher interest  rates  and better product features in the Non-par segment. During FY18, Max has delivered an impressive 20.6% RoEV (+70bps).

Outlook

However  to mitigate this risk and reduce its dependence on Axis, Max  wants  to  purse  aggressive M&A and build new channels. The board has approved  fund raising upto Rs 50bn. We have tweaked our margin assumptions but  have  also  increased our Axis share transfer discount. Our TP however remains  unchanged. We maintain BUY with a TP of Rs 665 (FY20 EV+ 26x FY20E VNB).