Buy Max Financial Services Ltd for the Target Rs 1,860 by Motilal Oswal Financial Services Ltd
VNB – 14% above est.; VNB margin up 310bp YoY
* Axis Max Life Insurance (MAXLIFE)’s APE grew 15% YoY to INR19.2b (in line).
* MAXLIFE’s VNB grew 33% YoY to INR4.5b (14% beat), resulting in a VNB margin of 23.2% (MOFSLe of 20.5%) vs. 20.1% in 1QFY26.
* The EV of INR304.2b reflected an operating RoEV of 14.9% (vs. 14.3% in 1QFY26). The company reported profit of INR1.2b (+37% YoY).
* About 80% of the GST impact was absorbed in 4QFY26, with the residual impact now largely behind the company. Distribution reach remains strong with 690+ Axis branches and 2,700+ branches of non-Axis banks, providing significant headroom for deeper penetration into Tier-2 and beyond.
* We raise our VNB margin estimates by 50bp/100bp for FY27/28 considering the strong performance in 1QFY27 and expect APE to sustain the ~16% growth trajectory. We reiterate our BUY rating on the stock with a TP of INR1,860, premised on 2x FY28E EV
Key highlights from the management commentary
* About 30% of the margin improvement was driven by product mix and operating leverage, while ~70% came from favourable yield curve movements.
* Axis remains a key franchise with 65-70% counter-share, while Max is the No.1 player at Yes Bank as well as in four of the seven recent bank partners.
* New credit-life partnerships onboarded during the quarter should provide an additional growth leg.
Valuation and view
* MAXLIFE maintains a better-than-industry APE growth trajectory. Strong traction in the protection and annuity segments, new product launches in the non-linked segments as well as yield curve movements have resulted in robust VNB margin expansion offsetting the GST impact.
* The proprietary channel continues to drive growth across offline and online channels, while the bancassurance channel posted strong growth in non-Axis partnerships and growth improvement in the Axis Bank channel. Rising Tier-2 and beyond penetration will help maintain growth momentum going forward.
* We raise our VNB margin estimates by 50bp/100bp for FY27/28 considering the strong performance in 1QFY27 and expect APE to sustain the ~16% growth trajectory. We reiterate our BUY rating on the stock with a TP of INR1,860, premised on 2x FY28E EV.
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