Neutral MAX Financial Services; target of Rs 900: Motilal Oswal

Motilal Oswal's research report on MAX Financial Services

MAX Financial Services (MAXLIFE) reported a healthy PAT of INR1.6b in 2QFY24 (36% beat) with APE/VNB growth of 39%/12% YoY. In 2QFY24, total APE grew 39% YoY to INR16.5b (in line). Absolute VNB grew 12% YoY to INR4.2b (16% miss) and VNB margins came in at 25.2% in 2QFY24 (declined 615bp YoY, our estimate of 30.1%). Margin pressure was seen in ULIPs, owing to the new product (index fund), which has lower margins. Annuity margins were lower due to the change in the mix within the segment.

Outlook

We have cut our absolute VNB estimate by 6.2%/3.8% for FY24/25, resulting in a VNB margin of 28.1% in FY25 (vs. 29.2% earlier). We reiterate our Neutral rating on the stock with a TP of INR900, premised on 2.0x Mar’25E EV and a holding company discount of 20%.