MAX Financial Services Q1 Review - New Business Margin Disappoints Owing To Adverse Product Mix: Motilal Oswal

Motilal Oswal Report

MAX Financial Services Ltd. reported a weak performance in Q1 FY25, mainly due to a sharp contraction of 470 basis points in value of new business margin. Total APE grew 30.5% YoY to Rs 14.5 billion (in line), and absolute VNB rose 3% YoY to Rs 2.5 billion (22% miss) during the quarter.

Surrender charges are likely to impact VNB margins by 100-200bp for the company. Management will distribute the impact among all stakeholders – customers, distributors, and shareholders.

We have increased our annual premium equivalent growth estimates as Q1 momentum got stronger in July 2024. However, we have cut our VNB margin assumptions given the adverse product mix trends (higher share of ULIPs).

Reiterate Neutral with a target price of Rs 1,030, premised on 2.0 times March 26E enterprise value and a holding company discount of 20%.

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