Niva Bupa newly rated 'Add' at JM Financial; 10% upside potential seen

JM Financial Institutional Securities has initiated coverage on Niva Bupa stock with an ‘Add’ rating. The brokerage has given a target of ₹88 per share, implying 10 per cent upside from current levels. The brokerage values the company at 35x FY28e earnings per share (EPS) of ₹2.5.

 

At 10:58 AM, Niva Bupa’s share price was trading 0.65 per cent higher on BSE at ₹79.93 per share. In comparison, Sensex was up 0.11 per cent at 81,860.76.

 

In the past one year, Niva Bupa’s shares have gained 9 per cent, as compared to Sensex’s rise of 0.37 per cent.   CATCH LATEST STOCK MARKET UPDATES LIVE

 

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Why is JM Financial bullish on Niva Bupa?

Strong distribution mix

Niva Bupa is the third largest standalone health insurer (SAHI) in India, and enjoys the benefits of a widespread distribution mix of around 30/30/30/10 among individual agents and corporate agents, including banks, brokerages, direct channel, and others, according to the brokerage. With its diversified distribution, JM Financial expects Niva Bupa to continue gainning market share even in the face of potential liberalisation of agent tie-ups and composite licences.

Health insurance still has legs to grow

The brokerage believes that the weakness experienced in reported growth starting in H2FY25 should revert from H2FY26 once the amortised premiums are in the base. In FY24, 570 million lives insured contributed ₹1.2 trillion in premiums (average ticket size ₹2,000). With greater adoption of top-ups over government coverage, Redseer projects a 20 per cent compound annual growth rate (CAGR) for FY24-28e. JM Financial expects Niva Bupa to maintain 25 per cent gross premium CAGR over FY25-FY28e, before it normalises to 20-25 per cent in the medium term.

 

Health insurance grew at 19 per cent CAGR over the last decade, as compared to 13 per cent for general insurance and 11 per cent for nominal gross domestic product (GDP). Group and retail segments expanded at 18 per cent and 17 per cent CAGR, respectively, with Standalone Health Insurer (SAHI) retail market share rising to 58 per cent in FY25.  ALSO READ | Why did Systematix initiate coverage on Radico Khaitan? 16% upside seen

Why Niva Bupa among others?

Among health-focused plays, Star Health has strong retail moats but a trimmed group book, while third-party administrator (TPAs) like MediAssist face total addressable market (TAM) constraints, according to the brokerage. Niva Bupa’s diversified mix and widening banca relationships offer a broader runway for growth and share gains, including under potential liberalisation of agent tie-ups and composite licenses.

Growth suppressed by 1/n accounting

Adoption of 1/n accounting from October 2024 suppressed growth optics, as multi-year policies are amortised. Niva Bupa, with higher banca exposure, faced a greater impact, but base resets from October 2025 should normalise growth reporting, the brokerage said. 

All stars aligned on the regulatory front

Insurance Regulatory and Development Authority of India’s (IRDAI’s) “Insurance for All by 2047” and goods and services tax (GST) cuts on premiums will drive penetration. Though lower GST reduces near-term profitability (no ITC claim), repricing will ensure revenue neutrality while improving affordability for customers, believes JM Financial.