Star Health Q1 - FY25 May Accrue Benefits Of Price Hikes, Better Investment Performance: ICICI Securities

ICICI Securities Report

Star Health and Allied Insurance Company Ltd. Q1 FY25 profit of Rs 3.2 billion was in line with our estimate driven by better than-expected investment performance, offsetting the impact of higher-than-expected claims ratio.

FY25 should benefit from price hikes, higher growth in new channels, recovery of new business growth and better investment performance. These would lead to management guidance of combined operating ratio improvement of 100 basis points in FY25 while the company enjoys structural advantage of scale and network across hospitals, agents, assets under management and opex ratio.

Maintain 'Buy' with target price of Rs 728 based on 35 times (all unchanged) FY26E earning per share of Rs 20.8.

We factor in combined ratio of ~96.0%, investment yield of ~7.5% and gross direct premium income growth of 18%/20% for FY25/26E, respectively.

Key risks: High competitive intensity/claims impacting profitability.

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