MAX Financial Services
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9 June 2021
4QFY21 Results Update | Sector: Financials
CMP: INR996
TP: INR1,200 (+20%)
Buy
Steady performance; Non-PAR growth remains robust
Persistency improves; maintains healthy provisioning buffer towards
pandemic linked claims
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
Financials & Valuations (INR b)
Y/E MARCH
Net Premiums
Sh.PAT
NBP gr - unwtd (%)
NBP gr - APE (%)
Premium gr (%)
VNB margin (%)
Op. RoEV (%)
Total AUMs (INRb)
VNB(INRb)
EV per Share
Valuations
P/EV (x)
P/EVOP (x)
MAXF IN
345
343.8 / 4.7
1050 / 463
3/44/61
1053
MAXLIFE continues to demonstrate resilient performance amid a
challenging macro environment, led by healthy (36%) APE growth, aided by
robust growth in Non-PAR savings and recovery in the ULIP segment. After
witnessing robust Protection growth over 1H, the same moderated during
2HFY21.
Healthy product mix towards high margin segments and strong APE growth
aided VNB growth of 44% YoY during 4QFY21. Strong push via the
bancassurance channel has aided premium growth, while the proprietary
channel is showing healthy traction.
We expect 22% CAGR in APE growth over FY21-23E, with VNB margin
improving to 26.8% by FY23E. This would enable 26% VNB CAGR over FY21-
23E, while operating RoEV sustains ~22%.
Maintain Buy.
Gross written premium grew ~21% YoY
led by a 36%/40% growth in the
first year/single premium, while renewal premium grew ~14%. Shareholder
PAT declined 54% YoY to ~INR1.1b in 4QFY21 on higher additional
provisions towards COVID-19 death claims.
Individual APE grew 35% YoY in 4QFY21. Total APE growth stood at 36%
YoY, aided by strong trends in Non-PAR savings (143%), with the launch of a
new product 'Smart Wealth plan', while ULIP showed recovery trends.
Protection growth moderated at 5% YoY as Group Protection fell 17%,
while Individual Protection grew 17%. The share of Non-PAR savings
increased to 30% in FY21 v/s 18% in FY20. The share of Protection stood at
14% v/s 13% in FY20.
Absolute VNB growth was healthy at 44% YoY due to strong margin
profile and healthy product mix.
Margin stood ~24% in 4QFY21 (v/s 22.8%
in 4QFY20). Absolute VNB grew 39% YoY in FY21. VNB margin improved
sharply to 25.2% in FY21 (v/s 21.6% in FY20).
On the distribution side, banca APE reported robust trends and grew 41%
YoY, while proprietary channel APE witnessed a strong (22%) recovery in
4QFY21. The share of banca improved to 71% in FY21 (v/s 68% in FY20),
while the share of proprietary stood at 28% (v/s 31% in FY20).
MAXLIFE witnessed total net claims of ~INR1.2b in FY21 on account of
COVID-19 deaths. It made total provisions of INR3.4b due to a likely
adverse COVID-19 experience in FY22, and now holds an excess provision
buffer of INR5b on its Balance Sheet. Operating RoEV stands at 18.5% (v/s
20.3% in FY20), impacted by higher COVID-19 provisions.
Persistency improved with 13th/61st month improving by 100bp/200bp to
84%/54%. In other cohorts, persistency trends remained stable (barring the
49th month). On the cost front, opex-to-GWP ratio declined to 20.7% (v/s
21.7%/20.8% over 9MFY21/FY20).
FY21 FY22E FY23E
190.2 224.9 272.0
5.2
7.1
8.0
22.3
21.0
24.0
19.5
20.7
24.3
17.5
18.2
21.0
25.2
26.4
26.8
18.5
21.0
22.3
904 1,066 1,246
12.5
15.8
19.9
274.5 325.5 390.8
0.0
0.0
4.5
3.8
3.2
29.0
21.6
17.2
VNB growth steady; persistency recovers further
Shareholding pattern (%)
As On
Mar-21 Dec-20
Promoter
17.0
17.3
DII
51.4
50.9
FII
23.1
19.7
Others
8.5
12.2
FII Includes depository receipts
Mar-20
28.3
29.0
30.6
12.1
Research Analyst: Nitin Aggarwal
(Nitin.Aggarwal@MotilalOswal.com) |
Himanshu Taluja
(Himanshu.Taluja@motilaloswal.com)
Alpesh Mehta
(Alpesh.Mehta@MotilalOswal.com);
Yash Agarwal
(Yash.Agarwal@motilaloswal.com)
Y
Investors
are advised to refer through important disclosures made at the last page of the Research Report.
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.