Max Financial Services Q3 Review - Inline; New Business Value Margin Contracts 1,200 Bps: Motilal Oswal

Motilal Oswal Report

Max Financial Services Ltd. reported a decent performance in Q3 FY24. Total annual premium equivalent grew 19% YoY to Rs 17.95 billion (13% beat), whereas absolute value of new business declined 17.5% YoY to Rs 4.9 billion (14% beat) and VNB margins contracted significantly by 1,200 basis points YoY to 27.2% (our estimate of 27%).

The margin contraction was a result of changes in the product mix, with a decline in non-par and an increase in unit linked insurance plans.

Max Life will continue to focus on growth. VNB margins are expected to be around 26-27%.

We have cut our absolute VNB estimates by 5.1%/7.8%/6.1% for FY24/FY25/FY26, resulting in a VNB margin of 27.5% in FY26.

Maintain Neutral with a target price of Rs 1,040, premised on 2.0 times March-26E embedded value and a holding company discount of 20%.

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