HDFC Securities' research report on Star Health and Allied Insurance
STARHEAL printed soft NEP growth (+11% YoY, 4% below our estimates), impacted by a slowdown in group business; however, loss ratios clocked in at 62% (-1.8pps QoQ, in-line) driving COR to 91.4% (-3.4pps QoQ). While FY23 RoE was sub-optimal at ~12% due to soft growth (+15% YoY), we expect STARHEAL to deliver a rebound in growth (~22% CAGR over FY23-25E) and stable loss ratios, supported by a price hike in its flagship product and tighter underwriting and claims review process. As the largest standalone health insurer (FY23 retail GDPI market share of 34%), our thesis on STARHEAL is anchored in a very strong distribution network, retail-dominated business mix and best-in-class opex ratios.
Outlook
We expect STARHEAL to deliver revenue/APAT CAGR of 22/41% over FY23-25E and RoEs in the range of 17/18% for FY24E/25E and maintain BUY with an unchanged TP of INR795 (DCF derived multiple at 38x Mar-25E P/E and 6x Mar-25E P/ABV).
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