Max Life reported a robust set of numbers in FY22 despite Covid-19-led disruptions to growth and mortality. The VNB margin threw a big surprise, expanding to 27.4 per cent in FY22 (FY21: 25.2 per cent; 9M-FY22: 25.1 per cent).
Going ahead, Max Life will focus on growth through continued investments in its proprietary distribution channel and Axis Bank-led banca distribution channel, and responding to competition by improving products. Against this backdrop, the company has guided for a 25-26 per cent VNB margin, in line with our estimates.
On the non-operational front (MAXF-Max Life merger, purchase of about 5.2 per cent stake in Max Life by MAXF from Mitsui Sumitomo and up to 7 per cent additional stake transfer to Axis Bank group), the status was broadly unchanged from 9M-FY22.
Overall, the FY22 performance, especially on a relatively stronger base of FY21 and amid a difficult environment in multiple Covid waves, reinforces our belief in the long-term profitable growth potential of Max Life. After the recent sharp correction, the stock price of Max Finance is valued attractively and does not reflect the true value of the underlying Max Life franchise.
We reiterate our Buy rating with a revised target price of ₹1,030.