Buy Star Health and Allied Insurance; target of Rs 570 : ICICI Securities

ICICI Securities's research report on Star Health and Allied Insurance

We believe Star Health (Star) is on a steady earnings growth trajectory driven by better incremental balance between volume growth and profitability, as witnessed in its H1FY26 result (13.1% YoY growth in GEP, while IFRS PAT grew 20.9% YoY). We expect various initiatives undertaken in FY25 to yield results in earnings from H2FY26. This may be supported by: 1) Strong retail fresh business growth (24% YoY growth in H1FY26 and 50% in Oct’25). 2) Reducing group exposure (GWP contribution fell from 9% in Q2FY25 to 5% in Q2FY26). Star experienced a rise in group segment’s loss ratio from 78% in Q1FY25 to 85.1% in Q1FY26. This improved in H1FY26 to 82.1% (vs. 85.9% in H1FY25). 3) Benefit of repricing undertaken in 60-65% of portfolio in mid-FY25 and calibrated annual repricing strategy. 4) Higher equity AUM with mix increasing from 6.7% in Mar’24 to 15% in Mar’25 and 18% in Sep’25. 5) Several digital initiatives could improve efficiency with EOM at 32.3% in Q2FY26 (calculated).

Outlook

We maintain BUY on Star with a revised TP of INR 570 (earlier INR 512), based on 20x FY28E EPS of INR 28.4 (earlier 25x on FY27E EPS of INR 20.5) under IFRS. Key risks: Higher competitive intensity or claim denting profitability apart from risk on margins from GST cut.