Star Health and Allied Insurance Company Ltd. share price target

Star Health’s (STAR) dominant market position potentially makes it a key beneficiary of India’s growing health insurance sector. This is underlined by its FY23 performance (reported/adjusted PAT of Rs6.2bn/7.7bn) with combined ratio/retail health market share/adjusted RoE of 95.3%/34%/15.4%.

Star Health’s (STAR) dominant market position potentially makes it a key beneficiary of India’s growing health insurance sector. FY23E performance (we expect reported PAT of Rs6.3bn including one-off ESOP costs) will likely solidify expectations of Rs10bn PAT in FY24E. New regulations of open architecture and EOM guidelines can further boost the company’s position, which has significant moats in the form of distribution, hospital network tie-ups, and claim management track-record.

Star Health (Star) reported PAT of Rs5.2bn in 9MFY23 (split Rs2.13bn in Q1FY23 and Rs930mn in Q2FY23 and Rs2.1bn in Q3FY23). Adjusted for a one-off ESOP cost, 9MFY23 PAT works out to be Rs6.3bn. We remain confident about the company’s ability to manage a higher than industry growth in retail health premium along with profitability as targeted through <95% combined ratio.

Beyond the retail under-penetration driven growth story, we appreciate the operationally intensive nature of health insurance business from the perspective of claims management, engagement with agency channel and workflow running with the network hospitals.

Star Health (Star) reported Rs3bn PAT in H1FY23 (split Rs2.13bn in Q1FY23 and Rs930mn in Q2FY23). The Q2 numbers were lower than our expectations largely due to higher loss ratio of 68.2%.