Max Financial, HDFC Life, SBI Life On CLSA's Radar As Regulatory Concerns Ease
CLSA said regulatory concern for the banca channel was now in the behind.
Max Financial Services Ltd., HDFC Life Insurance Co., and SBI Life Insurance Co. got target price and ratings upgrades from CLSA as it sees regulatory concern for the banca channel in the behind. The brokerage removed regulatory uncertainty discount.
Max Financial has been upgraded from 'outperform' to 'high conviction outperform'. While HDFC Life and SBI Life were both upgraded to 'outperform' from 'hold'.
Max Financial's subsidiary, Axis Max Life, has guided of 300-400bps higher growth than private players, which is achievable, according to the brokerage. "With an 80% stake, the firm's unlisted primary subsidiary, Axis Max Life, has been India's fastest growing life insurer, with a 19% APE CAGR over the past two years."
While online has been key to growth, CLSA expects the agency channel to start significantly contributing as the 57,000 new agents added over the last two years become productive, the brokerage said.
It removed Max Financials' holding company discount and raised its appraisal value-based target price from Rs 1,420 to Rs 1,800. The target price implies an upside of 22%. The brokerage estimates the stock's PE multiple should have a 15% discount to HDFC Life's. But given its potential for faster growth, Max Financial is CLSA's top pick in life insurance.
SBI Life is significantly better than Axis Max Life at VNB margins/actuarial performance; however, Axis Max Life has guided for higher growth, CLSA said.
For HDFC Life, the brokerage raised target price to Rs 890, implying a 2.54 times FY27CL EV, and upgraded the rating to 'outperform'. It aims to double its APE/VNB in four years and FY26-28CL APE CAGR of 16%, CLSA said.
The brokerage also hiked SBI Life's target price to Rs 2,020, implying a 2.05 times FY27CL PEV and upgraded the rating to 'outperform'. It guided for 13-14% growth in individual APE in FY26, below the guidance of HDFC Life and Axis Max Life. However, super actuarial performance and a best in class VNB margin will continue to support healthy multiples for SBI Life, CLSA said.
ICICI Prudential Life has been a 'safe heaven' for the past few months among listed life insurers, according to the brokerage. "We have limited 10% upside to our new Rs 710 target price, implying a 1.65 times FY27CL PEV," it added.
