Buy Max Financial Services Ltd For Target Rs. 1,800 By JM Financial Services
Axis Max Life reported APE/VNB growth of 15%/27% YoY. While growth was in line, VNB margin of 25.5%, up 190bps YoY, +200ps JMFe, was a positive surprise. This was led by a margin-accretive product mix –ULIP volumes declined while annuity and protection grew 122%/34%. Also, par and non-par business grew 41%/17% YoY. While we had anticipated the mix shift away from ULIPs towards non-linked savings, we had expected margins to be adversely affected by GST 2.0. We wait for management commentary on that. Meanwhile, EV grew (2% QoQ, 15% YoY) to INR 268.9bn, in line with JMFe, including an impact of INR 2.7bn (~1%) due to GST 2.0. We wait for concall to revise our estimates.
* APE growth inline with RWRP, prop was strong at +18% YoY: While individual APE grew a strong 15% YoY, slightly ahead of RWRP (Retail Weighted Received Premiums) growth of 14% reported to IRDAI, which was ~800bps lower in 1Q. Growth was led by proprietary channel, up 18% YoY to INR 19.4bn, while partnership channel also reported a healthy growth of 13% YoY. The company changed its channel reporting, combining others and Banca into Partnership channel.
* Strong margin performance led by product mix shift away from ULIPs, GST impact to be quantified in concall: The product mix shift was sharp on a YoY basis - ULIPs declined by 7% YoY, while non-par grew at 17%, also seen a sharp increase in annuity by 85%. While we had anticipated the mix shift away from ULIPs towards non-linked savings, the strong shift from ULIP to non-par is seen in this quarter. Meanwhile, group credit life grew ahead of expectations, at 23%. While we await management commentary on margins, we believe the product mix justifies the strong margin performance. EV grew (2% QoQ, 15% YoY) to INR 268.9bn, in line with JMFe. The company has recognised the GST impact of INR 268mn, without which EV amounts to INR 271.6bn.
* First cut view: Axis Max Life’s management had guided for a growth of 300-400bps above the industry in FY26, with Axis Bank itself growing at 13-14%. Management commentary on sustained growth will be keenly awaited. With GST 2.0 coming in, we are awaiting the impact of GST on demand and ITC on company financials.
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SEBI Registration Number is INM000010361
