Add Max Financial Ltd For Target Rs 1,900 By Emkay Global Financial Services Ltd
Axis Max Life delivered a healthy performance in Q4FY26, with VNB margin of 28.2% (up 20bps YoY), beating our estimate of 26.9%. However, Q4FY26 APE at Rs35.9bn (up 18% YoY) missed our estimate by ~3%. The company delivered a strong VNB margin in Q4, despite the impact of GST ITC losses – driven by a favorable product mix and a likely increase in product level margins. Led by the GST rate exemption, the Retail Protection segment saw a strong 46% YoY growth while the Annuity segment witnessed a robust 123% YoY growth in Q4FY26. The Axis Bank channel saw improvement in growth momentum during Q4, delivering ~9% APE growth. Proprietary channels witnessed strong growth momentum during Q4. To bake in the Q4 developments, we raise our VNB margin estimates by ~20-30bps over FY27-28E, while keeping our APE estimates largely unchanged. Our EV estimate increases by ~7%, largely owing to capital raise. We maintain ADD on MAXF, and Mar-27E TP of Rs1,900, implying FY28E P/EV of 2.0x.
VNB beats estimates led by robust VNB margins
During Q4FY26, APE stood at Rs35.9bn, up 18% YoY albeit ~3% lower than our estimates largely on account of deferred purchases given the geopolitical uncertainties. Despite the GST ITC loss-related impact, VNB margin at 28.2% (up by 20bps YoY) was higher than our estimate of 26.9%. Healthy VNB margin during the quarter was driven by a favorable product mix and likely increase in product level margins. As a result, Q4FY26 VNB at Rs10.1bn grew 19% YoY and was ~1% higher than our estimate. Embedded Value at Rs288.7bn increased 14.6% YoY and was impacted by a negative economic variance of Rs7.14bn and was in line with our estimates. 13th month persistency saw a YoY dip while other cohorts saw improvement in persistency. Solvency ratio reduced to 194%, from 201% YoY led by strong growth in the protection segment.
Axis Bank sees healthy momentum; Retail protection witnesses strong growth
During Q4FY26, the Retail Protection segment saw a strong 46% YoY growth on the back of GST rate exemption driving increased affordability. The annuity segment saw a strong 123% YoY growth in Q4, while the Non-Par Savings segment witnessed ~10% decline. The proprietary channels saw a strong 24% YoY growth during Q4, largely driven by strong growth in the online channels. Partnership channels grew ~14%, led by strong growth in the ‘other banks’ channel. Further, the Axis Bank channel witnessed healthy growth momentum, delivering ~9% APE growth in Q4FY26 (vs 7.5% YoY growth in 9MFY26) led by the transformation project, which the management initiated a few quarters ago. Going forward, we expect the growth momentum to continue in the retail protection segment which is likely to support VNB margins
We maintain ADD with unchanged Mar-27E TP of Rs1,900
To bake in the Q4 developments, we tweak our estimates; this results in a largely unchanged APE, while we raise VNB margin estimates by ~20-30bps which leads to a ~1% rise in VNB over FY27-28E. Our EV estimates increase ~7%, as we build in a capital raise in FY27E. We retain ADD and Mar-27E TP of Rs1,900 implying FY28E P/EV of 2.0x.
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