Notably, after dipping sharply to a low of Rs 541 intra-day on Wednesday, the scrip recovered some lost ground and closed at Rs 568 or a fall of 8.5 per cent. This could be partly because investors would have used this correction as a buying opportunity, say analysts. Santosh Singh, banking analyst at Haitong Securities, says, “Max is an exceptional franchise with or without HDFC Life. After today’s fall, the stock is not expensive. They are doing really well operationally, too.” He has a target price of Rs 756 on the stock, the highest among analysts.
Importantly, after tepid growth in annualised premium equivalent (APE) in the past few months, Max Life saw some recovery in growth in March-April. APE helps compare life insurance revenue by normalising premiums into regular annual payments. But, given its slower growth relative to peers, the company has lost some market share. On the other hand, HDFC Life witnessed slowing growth in April, giving away some of the improvement seen in March.
It is important to note apart from elevating the merged entity to number two position in the private life insurance sector, the merger would also entail significant cost synergies.
In this backdrop, most analysts are positive on Max. In the near term, though, the stock will move in line with the news surrounding the merger.
Source: Business-Standard