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Motilal Oswal Report
Star Health and Allied Insurance Company Ltd. reported a profit after tax of Rs 1.3 billion in Q2 FY24 versus Rs 934 million in Q2 FY23. Profit after tax was 32% below our estimate due to higher-than-expected claims and expense ratios.
Star Health had taken a price revision in Family Health Optima (with-effect-from May 01, 2023 on the renewal book), which will be reflected over the next 12 months.
The policy renewals (both in volumes and in value) were in line with the company's expectations.
As compared to the earlier guidance of 63-65% loss ratio, management now expects to exceed the same given the rising incidences of fever and respiratory diseases.
We have cut our earnings per share estimates by 13%/4% for FY24/25 to factor in higher claims and expense ratios in H1 FY24.
Considering the long-term growth potential for the industry along with investments by Star Health in profitable channels and products, we reiterate our 'Buy' rating with a target price of Rs 730 (based on 33 times FY25E earnings per share).
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