Neutral MAX Financial Services; target of Rs 1180: Motilal Oswal

Motilal Oswal's research report on MAX Financial Services

MAX Financial Services (MAXF) reported a steady performance in 3QFY25. The new business APE rose 17.4% YoY (in line) to INR21.1b. For 9MFY25, it came in at INR57.3b, up 26% YoY. MAXF reported a flat VNB growth on a YoY basis (in line) at INR 4.9b. VNB margin contracted ~400bp YoY to 23.2% (MOFSLe: 23.5%), mainly due to the shift in product mix towards ULIP and the impact of surrender charges. Shareholders PAT for the quarter declined 54% YoY to INR0.7b (56% miss). For 9MFY25, it reported a PAT of INR3.7b, down 11% YoY. For FY25, management has guided for 20% growth in overall sales and higher single-digit growth in absolute VNB. The margin is likely to be at ~25%. The higher share of ULIP has led to margin contraction.

Outlook

However, management has guided to reduce the share of ULIP to 35-40% from 44% currently. We broadly maintain our estimates. Reiterate Neutral with a TP of INR1,180, premised on 2.1x Sept’26E EV and a holding company discount of 20%.

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