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Motilal Oswal's research report on Star Health

Star Health (STARHEAL)’s net earned premium rose 12% YoY to INR38b (inline) in 4Q. For FY25, the net earned premium grew 15% YoY to INR148b. The claims ratio at 69.2% (vs. our est. of 68.1%) grew 510bp YoY in 4QFY25, with a 21% YoY increase in net claims incurred to INR26.3b (in-line). The rise was due to a higher claim frequency and severity. Operating expenses were in line, with the expense ratio (incl. commission ratio) at 29.9% (vs. our est. of 29.2%). The elevated claim ratio led to a 640bp YoY surge in the combined ratio to 99.2% (vs. our est. of 97.3%) in 4QFY25. A flat YoY performance with respect to investment income along with elevated claims resulted in a PAT of INR5.2m in 4QFY25. For FY25, PAT declined 24% YoY to INR6.5b.

Outlook

Considering the performance in 4QFY25, we cut our FY25/FY26 PAT estimates by 13%/2%, factoring in an elevated claims ratio and reduction of our investment income estimates. We reiterate our BUY rating with a TP of INR 460 (based on 25x FY27E EPS).

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Star Health - 01052025 - May

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