Buy Star Health and Allied Insurance; target of Rs 512: ICICI Securities

ICICI Securities research report on Star Health and Allied Insurance

We believe Star Health (Star) is on a steady earnings growth trajectory driven by better incremental balance between volume growth and profitability, as witnessed in its Q1FY26 result (14% YoY growth in GEP while IFRS PAT grew 44% YoY). We expect various initiatives undertaken in FY25 to show results in earnings from H2FY26. This may be supported by: 1) Strong retail fresh business growth (25% YoY growth in Q1FY26). 2) Reducing group exposure (GWP contribution fell from 9% in Q2FY25 to 5% in Q1FY26). Star experienced a rise in group segment’s loss ratio from 78% in Q1FY25 to 85.1% in Q1FY26. 3) Benefit of repricing undertaken in 60-65% of the portfolio in mid-FY25 along with calibrated annual repricing strategy. 4) Higher equity AUM with mix increasing from 6.7% in Mar’24 to 15% in Mar’25 and 17.5% in Jun’25. 5) Various digital initiatives could improve efficiency with EOM at 32.6% in Q1FY26 (calculated).

Outlook

We maintain BUY on Star with a revised TP of INR 512 (earlier INR 461), based on 25x FY27E EPS of INR 20.5 under IFRS (earlier on IGAAP basis with multiple of 30x). In terms of valuation, basis FY27E IFRS PAT, Star Health/Niva Bupa trade at 22x/31x P/E, respectively. Key risks include higher competitive intensity or claims denting profitability.

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Star Health and Allied Insurance - 03092025 - icici