Buy Max India;target of Rs 414: Edelweiss

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Edelweiss's research report on Max IndiaMax India’s (Max) Q3FY16 was a mixed bag with varied performance across business verticals. While growth in life insurance business was under pressure (lower sales contribution from bancassurance channel), it continued to deliver across critical business metrics—persistency, healthy AUM accretion and improving expense ratio. Hospital business extended improving trend, with existing hospitals remaining on track and new hospitals clocking >70% YoY revenue growth. Increasing probability of life insurance business improving its operating performance (reversing drop in financial savings), huge scalability potential in health care and potential value unlocking in other nascent businesses will help Max sustain valuations. The erstwhile Max India has been demerged and the listed entity is Max Financial Service (MFS). Hence, we have given TP of INR414 for that business (refer table 5 for details). Maintain ‘BUY’. This was second quarter of slower growth (APE declined in Q1FY16) in 9mFY16 due to lower contribution by bancassurance partner. Though momentum picked up in January, sustaining growth will be critical to drive performance. This was the first quarter of reported performance post demerger and the traded entity is Max Financial Services (MFS, holding life insurance business) while other 2 entities viz. Max Ventures and Max India (holding healthcare and allied businesses) are likely to be listed in March and April, respectively. We maintain ‘BUY’ with TP of INR414 (value of MFS). For all recommendations, click here Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

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