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Max Financial Gets 'Buy' Rating As Citi Initiates Coverage
- Citi Research initiated coverage on Max Financial Services Ltd. with a 'buy' rating and target price of Rs 1,840.
- Key drivers for the 'buy' rating include sustainable operating Return On Embedded Value (ROEV) delivery, partnership scale-up, and product innovation.
- Citi expects operating ROEV to remain strong at 17-18% over the medium term, outpacing competitors like HDFC Life and ICICI Prudential Life.
- Max Financial, the key operational subsidiary for Axis Max Life Insurance, is planning a reverse merger with its parent company in the future.
- Market share for Max Financial is expected to increase with a revived Annual Premium Market (APE) share, reaching 6.9% in fiscal 2025.
- The company's diversified product and channel strategy is seen as a strength for navigating market cycles.
- Downside risks highlighted by Citi include a sharp reduction in overall growth trajectory, competitive pressure, regulatory disruptions, and market volatility.
- Upside risks identified include higher APE growth, favourable shift in value of new business margins, and lower regulatory headwinds for the reverse merger.
- Citi notes that higher-than-expected APE growth, new product launches, and lower regulatory hurdles could provide investors with greater visibility.
- It is emphasized that Max Financial is well positioned for sustainable growth and market share accretion.
- The 'buy' rating reflects Citi's positive outlook on Max Financial's operational performance and strategic initiatives.
- Overall, Citi's coverage initiation underscores confidence in Max Financial's potential in the insurance market.
- Higher market share and sustained focus on product innovation are highlighted as key strengths for Max Financial's growth.
- Max Financial's ability to successfully navigate market cycles is attributed to its diversified product and channel strategy.
- The rating report suggests that Max Financial is in a favorable position to attract market share through distribution diversification.
- The company's focus on tapping untapped customer cohorts via subchannels and prudent product innovation is seen as beneficial for sustainable growth.
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