Medibank Private (MPL) - Mix and margins win

Medibank Private Limited provides private health insurance and health services in Australia. The company operates in two segments, health insurance and health care and wellness services assistance through its Medibank Health arm.

FY24 net profit after tax (NPAT) from Medibank Private came in 3% ahead of consensus expectations at $308 million, a rise of 13% on a year ago. Policyholder growth was lower than expected but this was more than offset by business mix and a higher gross margin.

Meanwhile, the company declared a 9.4 cents per share final dividend, beating consensus estimate by 7%. This is always strong focus on Medibank’s resident policyholder growth. This metric did fall short of the company’s FY24 guidance but had little impact on earnings, as non-resident policyholder growth and low claims inflation more than compensated.

Medibank Health’s operating profit grew 45%, adding 3% to the group’s increase. The company has again shown its dependability, delivering14.2% EPS growth in FY24 to surpass expectations. Despite this, the stock de-rated and now trades on a P/E multiple in line with the S&P/ASX 200Index.

With low growth expected and an undemanding P/E ratio, we view Medibank as a defensive stock that investors should own.  We maintain our Accumulate recommendation, but lift price target to $4.25 from $4.15, reflecting higher earnings expectations.

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