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Steady quarter; confident commentary on growth and margins

Axis Max Life delivered steady performance in H1FY26, with VNB margin at 23.3% (+220bps YoY; Emkay: 22.5%) and APE at Rs41.8bn (+15% YoY; Emkay: Rs41.5bn), driving strong growth in VNB at 27%. The improvement in VNB margin was largely driven by a shift in the product mix toward non-par and protection products. While GST ITC losses are expected to have a gross impact of ~300-350bps on VNB margins, the management plans to mitigate the impact by 1) improving the product mix and structures, 2) negotiating with distributors and vendors, and 3) improving cost efficiency. Despite the GST ITC loss impact, the management reiterated its guidance on VNB margin at 24-25% and on APE growth at ~15-17% for FY26. While we keep our APE and VNB margin estimates broadly unchanged for FY26-28, we raise our Sep-26E TP by ~6% to Rs1,900 (Rs1,800 earlier), implying FY27E P/EV of 2.4x, owing to confident commentary on growth and margin over the medium term. We retain ADD on the stock.

Healthy VNB margin delivery drives strong

VNB growth During H1FY26, APE at Rs41.8bn grew ~15% and was largely in line with our estimated Rs41.5bn. H1 VNB margin at 23.3% (+220bps YoY) was higher than our estimate of 22.5%. The improvement in VNB margin was on account of a shift in the product mix toward non-par and protection products and some increase in product-level margins. Resultantly, VNB at Rs9.7bn grew at a strong 27% (a beat vs Emkay estimate of Rs9.3bn), largely driven by a beat on VNB margin. Embedded value at Rs269bn grew 15% YoY and was largely in line with our estimated Rs270.4bn, although impacted by GST ITC losses of Rs2.68bn (1.1% impact on opening EV) in the renewal book.

Limited impact from GST ITC losses; healthy growth and VNB margin outlook

While the gross impact on the VNB margin due to GST ITC loss is ~300-350bps, the management plans to mitigate the impact by tweaking the product structure (especially for ULIPs and Par, which remain more impacted), shifting the product mix toward highmargin products, negotiating with distributors on commission rates, and improving cost efficiencies. The management stated that the protection segment has seen strong traction, following the GST rate cut benefits, and expects it to continue ahead. Axis Bank channel saw significant improvement in its product mix, and the management remains confident of growth recovery in the channel in H2. The management reiterated its APE growth (~15-17%) and VNB margin (~24-25%) guidance for FY26 despite the shortterm impact of GST ITC losses. The management continues to drive growth across proprietary and partnership channels, while maintaining a balanced product mix; it aims to grow 300-500bps above the industry growth rate over the next 5Y.

We revise up our Sep-26E TP to Rs1,900

Given the Q2 developments, we keep our FY26-28E APE and VNB margin broadly unchanged; however, we cut our FY26-28E PAT, owing to increased new business strain and the impact of GST ITC losses. Given the management’s confident commentary on APE and VNB margin over the medium term, we increase our Sep-26E TP to Rs1,900 (from Rs1,800 earlier), implying FY27E P/EV of 2.4x.

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