Buy Niva Bupa Health Insurance Company; target of Rs 90: ICICI Securities

ICICI Securities research report on Niva Bupa Health Insurance Company

Niva Bupa has been able to deliver standout growth in health insurance premiums (~40% CAGR between FY20-25) while its improved scale and assets under management should help improve margins and earnings growth ahead (expect IFRS PAT CAGR of 53% over FY25-27E). The relative high growth could continue driven by diversified channel which in turn creates positive flywheel on loss ratios, especially when players across industry including Niva have taken multiple price hikes. In this report, we have detailed the key tenets of earnings trajectory under accounting methods of IGAAP (without and with 1/n) and IFRS which should help appreciate the impact of long-term business mix and deferment of acquisition costs in the quest of realising the normalised annualised earnings.

Outlook

Under IFRS, we estimate PAT of INR ~4.7bn for FY27E and ascribe a multiple of 35x to the same to arrive at target valuation of INR 165bn. We have given higher valuation multiple of 35x PE to Niva Bupa (vs 30x for Star Health) to factor in higher than peer earning growth period in near horizon.