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Monday, August 3, 2009

Mid Cap Stock - Max India

Mid Cap Stock Stock - Max IndiaThe Rs- 4,500 crore group is diversified into insurance, healthcare, specialty packaging business and clinical research. Earlier, Max India group had a presence in telecom, pharmaceuticals and medical transcription businesses. At present, insurance business accounts for more than 80% of the company?s revenue, while each of specialty and hospitals business contributes 8%.

The remaining revenue is contributed by the company?s clinical research business. Max India is operating in the life insurance segment through its subsidiary, Max New York Life, which has New York Life as its foreign partner.

The company is among the top three private insurance players in the northern and western India. It has a conservation ratio of 80% that represents a high policy renewal rate. Nearly 60% of its revenue is contributed through agency channels and the rest through alternate channels. The company has outperformed the industry since the beginning of the current fiscal. For instance, during the quarter ended December 2008, the company posted a growth of 9% in its business, while the industry registered a 13% drop. With assets under management of Rs 4,800 crore, the insurance arm of the company is still under losses that rose on account of significant expansion undertaken by the company in the life insurance business.

Max India expects to achieve a break-even by FY12.The company, through its subsidiary Max Healthcare, operates a network of eight hospitals in the NCR region with an average of 714 beds. The average revenue per occupied-bed stands at around Rs 19,464 and its average occupancy rate stood 63%. While the business generates cash profits, a net profit breakeven is expected by FY11. The company?s specialty packaging business is growing at an average EBITDA rate of 15% per annum and returns 18-20% on capital.

The company is into a niche segment of manufacturing BOPP films and also provides packaging service to FMCG companies.The company, in July 2008, made its foray into the health insurance sector through a joint venture with UK-based international health insurer Bupa group. The venture has potential synergies with its existing life insurance, healthcare and clinical research businesses. Max India is quite aggressive on its insurance business with an intention of turning it into a profitable one by FY12. However, the company has revised its plans due to the financial slowdown and lowered its growth targets. The company now intends to open 100 sales offices every year with the total number of offices exceeding 1,000 by FY12. Agency strength is also slated to grow from current 72,000 to 2,00,000 agents during that period. The company aims to maintain a 15-20% lead over the markets performance. In order to strengthen its distribution channels further, the company has entered into a tie-up with Barclays Finance, one of the leading NBFCs with 119 branches.

The company has tie-ups with various domestic and international distributing companies.The fairly recession-proof insurance sector is not well represented in the Indian financial markets, but for a few listed companies. Among these, Max India seems to be a promising bet. The company has diverse business interests in insurance, healthcare, packaging and clinical research. Considering the growth clocked by its insurance business and its expected capital infusion, Max India is seen to be an attractive stock to buy for the long term.

Market Cap 4,531.64
EPS (TTM) 0.98
P/E 208.27
P/C 133.40
Book Value 93.04
Price/Book 2.19
Div(%) 0.00
Div Yield(%) -
Market Lot 1.00
Face Value 2.00
Industry P/E 26.69

1 comment:

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