Motilal Oswal's research report on Star Health
Star Health (STARHEAL) reported a PAT of INR2.1b in 3QFY23 v/s INR931m in 2Q. This was 22% above our estimate led by better-than-expected net earned premium growth (16% beat) to INR29b. GDPI grew 10% YoY to INR31b. The management has maintained its guidance of 63-65% loss ratio and 93-95% combined ratio for FY24. The confidence in the guidance stems from: a) price hike in the flagship product that contributed ~50% of the premium and b) growth from banca channels during the quarter. We raise our FY23E EPS by ~13% while broadly retaining our FY24/FY25 estimates, as the benefits from better-than-expected underwriting performance were offset by weaker-than-forecasted investment performance. Our combined ratio estimates are lower by 90bp/40bp/60bp for FY23/ FY24/FY25 to 95.0%/93.8%/93.3%, respectively.
Outlook
Maintain BUY with a revised TP of INR700 (based on 35x Sep’24E EPS). Uncertainties around regulations and increasing competition have resulted in a cut in the valuation multiple.
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