Star Health (Star) hosted its Analyst Day in Chennai, where the company demonstrated its strength across the functions and product life cycle stages of the health insurance business. Star has developed formidable expertise in product design, pricing, underwriting, distribution, and claims processing, given its 15 years of approach towards the health insurance business, particularly retail health. This expertise across the health insurance business functions gives management the confidence to continue its profitable growth journey (93-95% Combined Ratio, with ~20% premium growth) over many years, despite a fast-changing regulatory environment and heightened competition. On the regulatory front, the new Expense of Management (EoM) regulations would put additional pressure on smaller SAHIs and many multiline general insurers that are presently non-compliant. This would give an advantage to Star, which has far better expense ratios. Star’s shares have materially underperformed the market, owing to a combination of expensive valuation and earnings volatility, and currently trade on FY25E P/E of 23x, which looks appealing with growth and profitability expected to accelerate going ahead.
OutlookWe reiterate our BUY rating on the stock with a Dec-23 TP of Rs670/share.
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