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Max India to Outperform – SSKI

December 3, 2007

SSKI has initiated coverage on Max India with an OUTPERFORMER rating. The company has presence in insurance and healthcare, two of the fastest growing sectors. The life insurance venture, armed by industry’s most productive agency force, is set to reclaim market share led by a multi-channel distribution approach and an enhanced ULIP portfolio. With hospital beds likely doubling in the next 4-5 years, superior margins (20-22%) and a strong brand, healthcare business (MHC) too is a robust model.

Max New York Life Insurance [MYNL]: YTD FY08, market share has bounced back to 6.7%. Predominantly an agency-driven model, MNYL has the industry’s most productive agency force. At 18x FY10E NBAP and adding Embedded Value to it, SKKI values MNYL at Rs230/ share of Max, assuming 50% promoter ownership and 10% holding company discount.

Healthcare Franchisee Business: Max is well placed to participate in this opportunity. The business has broken even in FY08 and profitability will continue to improve as operational capacity is doubled to 1,223 beds by FY11 and operating margins touch 20-22%.

Sum of The Parts Valuation:
Max New York Life Insurance – Rs 230 / share
Max Healthcare – Rs 36 / share
Plastics Business – Rs 20 / share
Cash + Investmnets – Rs 30 / share

SSKI sets a Target Price of Rs 316 / share and an OUTPERFORMER RATING on the stock.

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