Nomura hikes Max Financial's target price as it expects co to outpace peers

The brokerage maintained a 'Buy' rating and a target price of ₹1,935, which implies upside potential of 15.8 per cent from Tuesday's close price.

Nomura on Max Financial Services

  Global brokerage Nomura has raised the share price target of Max Financial Services stock as it expects the company to outpace peers in growth till the financial year 2028 (FY28). The brokerage has maintained a 'Buy' rating but raised the target price to ₹1,935 from ₹1,400. The current target price is implying an upside of 15.8 per cent from Tuesday's close price. 

 

Max Financial Services, as per Nomura, has multiple tailwinds that will support faster growth. To begin with, Axis Max Life, a joint venture between Max Financial Services and Axis Bank, is the sixth-largest life insurer in the country in terms of total annual premium equivalent (APE). The joint venture reported 40–56 per cent annual premium equivalent (APE) in the financial year 2025 (FY25). 

 

 

Further, between financial year 2018 and financial year 2025, Axis Max Life delivered a 16 per cent compound annual growth rate (CAGR) rate for annual premium equivalent (APE), and 17 per cent CAGR for value of new business (VNB). It also had a high return on embedded value of 19 per cent. 

 

Nomura believes the bancassurance channel is robust for Axis Max Life because Axis Bank is the second-largest distributor of insurance among banks. 

 

The agent productivity of Axis Max Life could be faster than the industry growth, the brokerage said. The insurer added 80,000 new agents between the financial years 2023 and 2025.

 

Further, Nomura said Axis Max Life has established a strong partnership with online brokers, with an estimated mix of 10 per cent annual premium equivalent (APE) and 7 per cent new business premium (NBP). This particular channel is also a significant growth driver in protection and unit-linked insurance products (ULIP), it added.

 

That said, the brokerage said one of the Max Financial's drawback is that Axis Max Life is a high-cost insurer with an expense ratio of 89–110 per cent for the financial year 2025. 

 

An inconsistent actuarial performance of Axis Max Life is a drag in Nomura's view. The brokerage expects re-rating if the management proves itself on the metric of actuarial performance. 

 

The insurer also has to deal with near-term challenges like margins due to Goods and Service Tax (GST) cuts. Other downside risks could be the weak performance of equity markets, and low low-interest-rate environment could make life insurance savings products less lucrative.

 

The current target price indicates a 2 per cent discount to HDFC Life Insurance. Nomura believes the gap will likely continue. 

Max Financial Services is part of Max Group, and it currently holds an 87 per cent stake in Max Life Insurance. The insurance subsidiary is India's largest non-bank private life insurance company and the fourth-largest private insurer.     

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