Niva Bupa Gets 'Add' From Avendus Spark With 11% Upside Potential — Check Target Price

Niva Bupa Health Insurance Company Ltd. has received an 'add' rating from Avendus Spark, as the brokerage initiated coverage on the stock, with a price target of Rs 90. This price target implies a 11% upside compared to the current market price of Rs 81.35.

The brokerage noted, despite the challenges, Niva Bupa is better placed among SAHIs to navigate them due to its diversified product mix, channel mix and ability to hike prices.

"Among SAHIs, Niva Bupa has the highest exposure to long-term plans at approximately 25% in retail indemnity, and a significant portion of benefit-based health is also long-term in nature," it added.

The brokerage shared that with such an exposure, reported Gross Direct Premium Income growth will be impacted in the near term. "Reported GDPI growth to be under pressure due to 1/N; however, it should remain strong on an N basis," it added.

Avendus Spark highlighted that Niva Bupa has a bigger lever of reporting growth by taking price hikes versus peers. "Calibrated porting should aid better growth," it added.

The brokerage further expects a reported GDPI CAGR of approximately 24% in FY25-28E for the company.

"Given the new retail indemnity business is stagnating for the industry, this eventually can pose a risk to Niva Bupa to report strong growth in retail health," it noted.

The brokerage believes, overall, GDPI growth shall be more immune to a slowdown in retail indemnity business due to a significant exposure to benefit-based plans.

"Expected credit growth revival in a rate cut environment shall support growth. Hence, a diversified product mix should make the growth of Niva Bupa less volatile," it added.

Niva Bupa's strong growth in retail health over the past 4-5 years has relatively not been driven by price hikes. The brokerage added that the option of price hikes to drive growth in retail indemnity is more available to Niva Bupa versus peers. Any increase in prices can also help improve the overall loss or combined ratios.