Nuvama Institutional Equities' report on Star Health
Given a sharp (58.5%) fall in stock price over last eight months, we upgrade the stock to ‘BUY’. We estimate corrective actions in the form of retail portfolio repricing and selective group business underwriting shall result in reduced loss ratios. Moreover, we anticipate sustained momentum in retail new business growth and enhanced opex efficiency to drive CoR improvements. Lastly, stricter enforcement of EoM norms may lead to reduced competitive intensity. Implementation of composite license regime stays a key monitorable.
Outlook
We are tweaking estimates resulting in FY25E/26E/27E APAT changing by (1.1)%/5.2%/4.4%. We are reducing target P/E to 20.5x FY27E, yielding a TP of INR440 (earlier INR490).
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