Max India’s (Max) Q3FY16 was a mixed bag with varied performance across business verticals. While growth in life insurance business was under pressure (lower sales contribution from bancassurance channel), it continued to deliver across critical business metrics—persistency, healthy AUM accretion and improving expense ratio. Hospital business extended improving trend, with existing hospitals remaining on track and new hospitals clocking 70% y-o-y revenue growth.
Increasing probability of life insurance business improving its operating performance (reversing drop in financial savings), huge scalability potential in health care and potential value unlocking in other nascent businesses will help Max sustain valuations.
This was the first quarter of reported performance post demerger and the traded entity is Max Financial Services (MFS, holding life insurance business) while other 2 entities viz. Max Ventures and Max India (holding healthcare and allied businesses) are likely to be listed in March and April, respectively. We maintain ‘buy’ with target price of Rs 414 (value of MFS).