Emkay Global Retains Buy Call to Max Financial Services For Target Price Of Rs 1030

Leading Brokerage Firm Emkay Global Financial Services Ltd. has retained buy rating for the stock of Max Financial for a target price of Rs 1030 apiece. Max Financial Services also known as MFSL is an integral part of India's renowned business conglomerate, Max Group. According to Emkay Global, the top management of the company in its June 7 meeting presided over by Mr. Prashant Tripathy, CEO of Max Life, and Mr. Amrit Singh discussed company's business performance and growth trajectory.

The topic of the discussion included the plan to simplify the corporate structure is on track and updates from the regulator's end are awaited. The promoter is working on plans to reduce the pledge on MAXF shares. Max Life's share in the Axis Bank channel should improve and stabilize in FY23. Overall medium-term APE (Annualized premium equivalent) and VNB (Value of New Business) growth of above 20% remains an achievable target.

1. Stock Outlook

The Current Market Price of Max Financial Services Ltd. is Rs 829.55. Emkay Global has recommended investors to buy the stock for a target price of 1030 with a potential gain of 24.25%. The stock has touched its 52-week high of Rs 1148.05 apiece and 52-week low of Rs 696.50 apiece.

Current Market Price (CMP)	Target Price	Gain
829	1030	24.25%

2. Max Financial undertakes simplification of corporate structure

The simplification of the corporate structure has been one of the stated objectives of MAXF management. It will be a 3-step process: 1. MAXF buying a 5% stake in Max Life from Mitsui Sumitomo; 2. MAXF transferring a 7% stake in Max Life to Axis Bank subsidiaries; and 3. after the completion of Step 1 and 2, approaching regulators for the merger of Max Life and Max Financial, or any other way to bring the life insurance company at the listed level.

3. Promoters committed to bring down pledge level

The high pledge of promoter's holding in MAXF has been one of the key investor concerns. As per the latest filing, 13.46%, out of the 14.72% of promoter's stake in MAXF, is pledged. This translates to about 91% pledge levels, a material increase from 64% as of Dec-21.

The recent increase in pledge has largely been an outcome of the fall in share price (approximately 25% fall between Dec-21 and May-22) without any significant change to the promoter's debt level, which remains stable.

4. Company to pursue profitable growth

In the last five years, despite 2 years being disrupted by Covid19, Max Life has delivered solid EV and VNB growth rates of 20% and 24%, respectively. Management reiterated its commitment to deliver profitable growth in the medium- to long term. Due to the changing competitive landscape, the company is prioritizing growth over profitability, and has guided for a slightly lower VNB margin in FY23 than 27.4% in FY22.

However, the company is confident of delivering approximately 16-18% VNB growth, driven by APE growth. of growth strategy: The company will continue to augment and expand its agency channel to accelerate growth and profitability.

5. About Max Financial Services

Max Financial focused on life insurance. It owns and actively handles approximately 81.83% majority stake in Max Life Insurance, India's largest non-bank, private life insurance company. The company also provides vast protection and long-term savings solutions, through its multi-channel distribution that may include agency and third distribution partners. The market capitalization of Max Financials is Rs 28,629 crore.

Disclaimer

The above stock was picked from the brokerage report of Emkay Global. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.