Buy Max India, intention price Rs 234

Sharekhan has given a buy proposal on Max India with a intention price of Rs 234.

During Q4, Max India reported a stand-alone loss of Rs 13.50 crore, but was profitable on a consolidated basis led by the life insurance business.

The life insurance business showed strong results for FY2011 with a total premium growth of 20 %, preservation ratio of 81 % and profit of Rs 194 crore as against a loss of Rs 21 crore in FY2010. The embedded value of the insurance business grew by 18% year on year to Rs 3,216 crore.

Max Bupa Health Insurance business of Max India, registered a gross written premium of Rs 26 crore in FY2011. The company enrolled 46,000 lives in the first year of operations.

Max India is among the best managed companies in the life insurance space which gets reflected by way of its balanced product mix, high persistency ratio, higher average case per agent etc.

Max India reported a profit of Rs 130 crore in Q4 on a consolidated basis, a growth of 38% YoY. The profit was led by a strong growth in the revenues and the company's sharp focus on cost management.

The total consolidated revenues for Q4 came in at Rs 1,890 crore, up 5% YoY, led by a 22% year-on-year increase in operating revenues whereas the company has booked loss in its investment income.

Max New York Life's annualised premium equivalent during the quarter came in at Rs 472 crore, a growth of 13% YoY while other players registered a decline of 31% YoY.

The strong APE growth was driven by a focus on the traditional products and a distribution tie-up with Axis Bank. The company has posted a profit of Rs 194 crore in FY2011 compared woth a loss of Rs 24 crore in FY2011.

The expenses-premium ratio for the quarter dropped to 29% from 30% in the corresponding period of the previous year.

Max Health Care's Q4 revenues were up 21.8 % YoY to Rs 179 crore. The Ebitda margin increased to 11 % against 1.8 % in Q4. The company plans to add 1,000 beds in CY2012 in Punjab and Uttaranchal.

Max Specialty Products reported a 29.7% YoY increase in revenues at Rs 118 crore in Q4. The Ebitda margin declined to 10 % (from 14.2% in Q3FY2011). Profits from the segment grew by 16.7% YoY to Rs7 crore.

"We remain convinced about the long-term growth prospects of the life insurance industry in spite of the regulatory concerns plaguing insurance sales in the near term. The company is already done with capital infusion in the life insurance business while the treasury corpus of Rs 540 crore and inflows from life insurance business will take care of the funding requirements of the health insurance and healthcare segments. We maintain our buy recommendation on the stock with our sum-of-the-parts (SOTP) based target price of Rs 234," the brokerage said in a note.

Source: [moneyguru]