IGI Logo

Healthy performance for H1; rebranding makes it future ready

Max Life delivered a healthy performance for H1FY25, with APE growing 31% at Rs36.2bn and VNB margin at 21.1% (Emkay: 20.5%) resulting in VNB of Rs7.7bn (+15.5% YoY) as against our estimate of Rs6.9bn. With growth firing across the proprietary channels, management remains optimistic about growth outlook. While VNB margins are impacted by the new surrender regulations, management expects these to hover within the 23-24% range for FY25, thus resulting in VNB growth in the teens. The company plans refreshing its corporate name and brand identity with inclusion of ‘Axis’; this would further strengthen the company’s brand, hence driving more growth. To reflect the Q2 developments, we raise FY25-27E APE by ~4% and cut VNB margin by 10- 20bps, which leads to a ~3-4% increase in VNB estimates. We reiterate ADD on the stock, while revising up Sep-25E TP to Rs1,450 (from Rs1,350 earlier), implying FY26E P/EV of 2.1x

Strong APE growth and better-than-expected margins drive a healthy VNB

During H1FY25, Max Life reported a strong 31% APE growth at Rs36.2bn, higher than our estimate of Rs33.7bn. VNB margin at 21.1% (-2.8ppt YoY) came in better than our expectation of 20.5%. For Q2FY25, VNB margin stood at 23.6% vs our estimate of 22.8%. The 600bps QoQ increase in margin was driven by operating leverage and volume growth (500bps), and an increase (100bps) in rider attachments. Driven by the robust APE growth and better-than-expected margin, VNB at Rs7.7bn grew 15.5% YoY vs our estimate of Rs6.9bn. Embedded Value at Rs233.4bn grew 30% YoY (driven by capital raise) and logged a tad higher than our estimate of Rs230bn. AUM at Rs1,701bn grew 6% QoQ, and was 1.7% higher than our estimate. Persistency across major cohorts saw YoY improvement, while cost ratios witnessed sequential improvement. Solvency ratio stood at 198% for the quarter.

Growth to remain in high gear; rebranding with inclusion name ‘Axis’ for a stronger tomorrow

Max Life delivered robust 31% APE growth on the back of strong demand in ULIPs driven by buoyant equity markets. Increased focus on rider attachment resulted in strong growth in the protection segment, with a positive effect on margins. While management continues to invest in the proprietary channels of distribution, it remains optimistic about the growth outlook. Management expects VNB margin to remain in the 23-24% range, given impact of the new surrender regulations that would lead to VNB growth in the teens. Plan to refresh the corporate name and brand identity by including ‘Axis’ will further strengthen the company’s brand positioning, thus driving increased trust among customers and so leading to further growth. Additionally, the rebranding will aid the company to penetrate in areas beyond Tier-1 where the ‘Axis’ branding is much stronger. Overall, combining of the two brands will result in further brand strengthening and increased customer preference, thus driving further growth for the company.

We retain ADD with revised Sep-25E TP of Rs1,450

To reflect the developments in Q2, we tweak our FY25-27 estimates which has resulted in ~4% increase in APE; we however cut our VNB margin by 10-20bps, leading to a 3- 4% increase in VNB estimate. We retain ADD on the stock, and revise up our TP to Rs1,450 (from Rs1,350 earlier), implying FY26E P/EV of 2.1x. While VNB margins remain under pressure, we believe Max Life’s investment in distribution channels and rebranding via inclusion of the ‘Axis’ name will drive healthy APE growth in coming quarters.

For More  Emkay Global Financial Services Ltd Disclaimer http://www.emkayglobal.com/Uploads/disclaimer.pdf & SEBI Registration number is INH000000354