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Max India Ltd. — Insurance drives value;
Maintain Buy
Country Overview
Raise our SOTP based PO to Rs222/sh
We raise our sum of the parts PO to Rs222/sh owing to stable growth in
insurance business post the new regulatory regime. Better than expected growth
in New business, expense management and growing AUM’s to drive the value of
insurance business.
Insurance business in the drivers seat, valued at Rs196/sh
Max NewYork life has managed to grow its new business premium even in tough
times (8% FY premium growth in FY2011 vs. decline of 19% for the private
industry). We value the insurance business at Rs196/sh (USD1.6bn, +33% on our
earlier value) using a 9x NBAP multiple on FY13E NBAP & 1xFY13E EV. Max is
better poised to grow on a stronger distribution network (AXIS bank tie-up).
Profitability: key focus for insurance business
Embedded value grew by 18% in FY11 to Rs32.2bn as against an 8% growth in
FYP growth. We forecast the EV to grow to Rs44.9bn by FY13E. Though the total
premium income grew by 20% yoy for FY2011, the company reported an AUM of
Rs138bn (yoy growth of 37%) for FY2011. The company’s conservation ratio of
78% in 1QFY12 also stands in the top quartile of the industry.
Other businesses valued at Rs26/share (US$154mn)
With aggressive expansion plans to increase bed capacity to 1800+ by 2012,
improving occupancy rate and 23%+ revenue growth, we expect healthcare
business EBITDA margin to scale up to 8% by FY13E. We value the hospital
business stake at US$78mn (Rs13/sh) based on 10x FY13E EBITDA multiple.
We value other businesses (Speciality chemicals and Clinical services) at
Rs13/sh (US$77mn) based on sector average EBITDA multiples.
Max India (XMXIF)
Our sum of part based PO is Rs222. We peg the value of the insurance biz at
Rs196/share,owing to stable growth in insurance business post the new
regulatory regime. Better than expected growth in New business, expense
management and growing AUMs to drive the value of insurance business. We
value the insurance business at Rs196/sh (USD1.6bn), we use a 9x NBAP
multiple on FY13E NBAP & 1xFY13E EV. We value other businesses
(Healthcare, Speciality chemicals and Clinical services) at Rs26/sh based on
sector average EBITDA multiples. The risk to our PO would largely be from lack
of growth in the insurance business.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Max India Ltd. — Insurance drives value;
Maintain Buy
Country Overview
Raise our SOTP based PO to Rs222/sh
We raise our sum of the parts PO to Rs222/sh owing to stable growth in
insurance business post the new regulatory regime. Better than expected growth
in New business, expense management and growing AUM’s to drive the value of
insurance business.
Insurance business in the drivers seat, valued at Rs196/sh
Max NewYork life has managed to grow its new business premium even in tough
times (8% FY premium growth in FY2011 vs. decline of 19% for the private
industry). We value the insurance business at Rs196/sh (USD1.6bn, +33% on our
earlier value) using a 9x NBAP multiple on FY13E NBAP & 1xFY13E EV. Max is
better poised to grow on a stronger distribution network (AXIS bank tie-up).
Profitability: key focus for insurance business
Embedded value grew by 18% in FY11 to Rs32.2bn as against an 8% growth in
FYP growth. We forecast the EV to grow to Rs44.9bn by FY13E. Though the total
premium income grew by 20% yoy for FY2011, the company reported an AUM of
Rs138bn (yoy growth of 37%) for FY2011. The company’s conservation ratio of
78% in 1QFY12 also stands in the top quartile of the industry.
Other businesses valued at Rs26/share (US$154mn)
With aggressive expansion plans to increase bed capacity to 1800+ by 2012,
improving occupancy rate and 23%+ revenue growth, we expect healthcare
business EBITDA margin to scale up to 8% by FY13E. We value the hospital
business stake at US$78mn (Rs13/sh) based on 10x FY13E EBITDA multiple.
We value other businesses (Speciality chemicals and Clinical services) at
Rs13/sh (US$77mn) based on sector average EBITDA multiples.
Max India (XMXIF)
Our sum of part based PO is Rs222. We peg the value of the insurance biz at
Rs196/share,owing to stable growth in insurance business post the new
regulatory regime. Better than expected growth in New business, expense
management and growing AUMs to drive the value of insurance business. We
value the insurance business at Rs196/sh (USD1.6bn), we use a 9x NBAP
multiple on FY13E NBAP & 1xFY13E EV. We value other businesses
(Healthcare, Speciality chemicals and Clinical services) at Rs26/sh based on
sector average EBITDA multiples. The risk to our PO would largely be from lack
of growth in the insurance business.
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