Jefferies and Bernstein remained constructive on Max Financial Services Ltd. after the company's first-quarter new business profit beat expectations, helped by a favourable product mix, yield-curve movements and cost efficiencies.
Max Financial reported a 37.2% YoY rise in consolidated net profit to Rs 96 crore, while total income increased 16.8% to Rs 14,977 crore.
Jefferies On Max Financial
Jefferies retained its target price of Rs 2,250, implying an upside of about 50% from the current market price of Rs 1,501.40. The brokerage said value of new business, or VNB, at Rs 450 crore was 17% above its estimate, while the VNB margin was 360 basis points ahead of expectations.
The better-than-expected margin reflected a more favourable product mix and yield-curve benefits, Jefferies said. Annual premium equivalent, or APE, grew 15% year-on-year, while VNB rose 33%, both ahead of private-sector peers.
Jefferies expects Axis Max Life Insurance to deliver an 18% compound annual growth rate in VNB over the next three years, supported by 16% APE growth and 140 basis points of margin expansion. It expects FY27 APE to rise 15% and the VNB margin to improve to 26.5%, helped by a higher share of annuity and protection products and cost-efficiency measures.
Bernstein On Max Financial
Bernstein maintained its 'outperform' rating and a target price of Rs 2,080, implying about 39% upside. It said Max Financial's 15% growth in new sales and sharp margin improvement drove the 33% rise in new business profit, well ahead of expectations.
The brokerage said Q1 new business margin stood at 23.2%, compared with about 20.1% a year earlier. It attributed about 70% of the margin improvement to favourable yield-curve movements, with product-mix changes and cost optimisation accounting for the rest.
Sales growth was led by protection, annuity and participating products, while unit-linked and non-participating products were muted. Proprietary channel sales rose 15%, led by online business, while partnership channel sales increased 16%.
Bernstein also noted that Axis Bank raised its stake by about one percentage point to 19.99%, improving solvency and reducing the immediate need for a capital raise.
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