I think, in a technology driven business, margin improves as revenue increases. Though it seems like Medi has no pricing power left, as industry consolidates and insures more rely on TPAs, Medi will slowly increase the yield. It will take time.
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On the balance sheet published in Sept, Contract Liabilities were 255Cr,
But on the recent concall i.e. As of dec25 contract liabilities are 227Cr.
Can contract liabilities decrease? how?
Does this mean some policy holders not renewing with Medi?
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Anyone have opinions on these growth assumptions I have about MediAssist? Do you think these estimates are optimistic / realistic / pessimistic considering the broader TPA landscape?
FY30 estimate from me of 2500cr revenue, 13.5% PAT margin gives 338cr PAT
Assuming 7.04Cr shares, that gives FY30 fwd EPS of Rs. 48. At current price of Rs 459 this implies a 5yr fwd PE of 9.5. At a 25 fwd PE, the 5 yr forward price would be Rs. 1200 (48*25) implying stock price CAGR 21.2%
This assumes a consolidated revenue CAGR of 28.1% and PAT CAGR of 27.6% from FY25 to FY30
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They already have 30 percent of marketshare of group health insurance premium under management . This vertical is more than 80 percent of their revenue. To grow from here they have to consolidate aggressively which means raise more money for which they have an enabling provision.
So expect equity to be diluted in this year
Individual health premium is 10-15 percent(not sure) of revenue but that is harder to grow and while the company does not say it, the cost of servicing that ans acquiring that may be high
If Your business growth assumptions have visibility to solve for above two questions then it makes sense.
On a side note bajaj does their claim settlement process inhouse prolly because they are big on tech (like bajaj finance). Lombard also has decent tech.
Discl: studied but was not sure about ORGANIC growth in the business.
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Stance - Invested
I feel the growth will be lower than what you have assumed.
- The company already has 30 %+ market share in health insurance. It should mimic the health insurance premium growth in the topline (14-15%).
- This is because the industry has stickiness with corporates. They acquire just to get the clients from competitors - what it tells is that organic acquisition of clients are difficult.
- What I feel that profit growth should be 2-3% higher (Say 17-18%), because the business has operating leverage. Expenses wont grow at the rate of revenues
- Also, the valuations look attractive to me because the business model has longevity. The health insurance sector and premium growth is a structural story for India for next 15-20 years. It will not be explosive but double digit for sure.
- This company gives one access to play insurance story with an asset light model, without other insurance related risks.
- If they acquire inorganically, the growth can be a bit higher. If one thinks about it, acquisition of companies is becoming like a sustaining capex for Medi Assist. Buying growth is a tricky business - a bad move can have long term consequences. The value will be created only if they acquire cheap and unlock value through synergies
Personally, I am not a big fan of acquisition led growth.
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Another interesting way to look at the business is revenue per employee. Since claim processing is process business and you infuse it with tech it should show significant growth in revenue without commensurate increase in employee count.
So far i think it is less than 10 lakhs per employee ( closer to 7-8)
The tech and AI they claim to build should be able to double or more this else there is no real margin expansion here.
Organic Growth as we all know is not a given.
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Was invested in it… But exited in this overall market downfall… Reason for exited… 1. Free float share percentage is high(old investor exiting), 2nd margins are very high compare to its peers… So your customer always watch your margin… And may competition comes and also inhouse tpa preffer by some companies… But one thing that making me excited about this space is news of entering of lic in medical insurance buisness (may by acquiring another company)… If big player like lic entered in this space then may be mediassist hit the jackpot by partner with it… Otherwise m not interested… Tracking… Dyor… Not a buy… sell
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