Shares of Max Financial Services, the parent company of Max Life Insurance, fell by more than 5% on August 16, following a contraction in insurance margins for the June quarter.
In response, brokerage firms Nomura and Motilal Oswal have adjusted their ratings on the stock to ‘Neutral’. Despite management’s optimism about countering margin pressures with increased premium growth, analysts find the company’s outlook to be overly ambitious.
Nomura has revised its stance on Max Financial from ‘Buy’ to ‘Neutral,’ citing the necessity for significantly higher Value of New Business (VNB) growth to meet the company’s margin guidance of 25-26% for FY25E. Additionally, Nomura has reduced its target price for the stock to Rs 1,130 per share from the previous Rs 1,150.
VNB is a critical metric that reflects the profit margin on new business acquired by a life insurance company.
