MAX INDIA (BOM:500271)
Reco price: Rs 181
Current market price: Rs 179.95
Target price: Rs 270
Upside: 50%
Brokerage: IDFC SSKI
Max India reported a consolidated loss of Rs 10 crore for September quarter 2009-10 as against a loss of Rs 225 crore in Q2 FY09. Bulk of the recent quarter’s total losses pertains to the life insurance business.
Max New York Life (MNYL), its insurance business, has reported gross premium of Rs 1,080 crore for September quarter, up 26 per cent y-o-y. Improving productivity of distribution network, business from ULIP products and metro cities continue to drive growth.
MNYL’s conservation ratio continues to be well above its average over the last few years. Over the next 6 months, MNYL intends to focus on better utilisation of the existing branch network.
In 2009-10, the company expects that it will require Rs 200-250 crore of incremental capital. In line with MNYL’s growth trajectory, the peak equity commitment is likely to get revised downwards from the current Rs 3,600 crore.
The long-term growth prospects of the life insurance industry are positive, and expect a change in the FDI/FII regulation as and when it happens to act as a trigger. Also the recovering capital markets would bolster premium growth and could thereby boost earnings. On the back of an improving growth prospects and high conservation ratio relative to peers, the brokerage assigned a 15 times NBAP multiple to MNYL. Maintain outperformer.
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