Target: ₹730

CMP: ₹649.80

Star Health and Allied Insurance is expected to clock 20 per cent retail health premium CAGR over FY23-25 led by: increasing sum assured per policy, price hike in its flagship product, and deeper penetration that is driving growth in the number of policies.

The management is intensely focusing on growing the business through the banca channel, with the help of the benefit-based products that have much higher profitability than retail health products. The share of banca stood at 5 per cent in FY23 and is expected to double by FY25. 

Star Health has maintained its guidance of reaching a combined ratio of 93-95 per cent, with a bias towards the lower end.

We expect a 19 per cent NEP CAGR over FY23-25 and project the combined ratio to improve to 92.5 per cent in FY25 from 95 per cent in FY23. These should result in a PAT CAGR of 47 per cent over FY23-25 and RoE improving to 16 per cent in FY25 from 11 per cenr in FY23. We reiterate our BUY rating with a 1-year TP of ₹730 (premised on 32x FY25E EPS).

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