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The Medibank share price has leapt 5% in a month. Could it be on the comeback trail in May?

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The Medibank Private Ltd (ASX: MPL) share price has risen by around 5% over the past month. But can the leading private health insurer’s shares keep going up?

Medibank has materially outperformed the S&P/ASX 200 Index (ASX: XJO), which has fallen by around 3% over the last month.

This week, the company gave a presentation at the Macquarie Australia conference and provided an update on its outlook for FY22.

Medibank presentation

The company says that private health insurance participation growth remains “strong”.

It notes there has been a shift in customer attitudes towards private health insurance. And by the direction of the Medibank share price, it appears to be a positive one.

Medibank says that private health insurance is an improving proposition given concerns about public hospital wait times. Further, it is reportedly seen as “more affordable and better value”, and consumers continue to invest in their health and wellbeing.

The ASX share points to six consecutive quarters of industry policyholder growth. The rolling 12-month policyholder growth increased from 2.68% in September 2021 to 2.79% in December 2021.

‘New to industry’ and younger cohorts are “major contributors” to policyholder growth, which Medibank says are positive signs for industry sustainability. There has also been a “significant” improvement in policyholder lapses.

Outlook for the private health insurer

For those interested in the Medibank share price, here’s what the company expects in the coming months.

Medibank says it expects industry participation growth to be higher than pre-pandemic levels over the medium term.

Growth will be supported by population growth, continuing shifts in consumer attitudes towards health and “strong bipartisan support” for the role of private health.

However, Medibank says that affordability is still key for growth. It has deferred its April 2022 premium increase of 3.1% for six months.

The ASX share says it’s on track to achieve resident policyholder growth of between 3.1% to 3.3% in FY22. It also continues to gain market share, which increased to 27.36% as at 31 December 2021. This was a rise of 14 basis points over the 2021 calendar year.

As at 30 April 2022, the financial year-to-date resident policyholder growth was 2.3%.

The company sees further growth opportunities. Target markets include corporate and regional customers. It thinks it can improve retention, particularly in its AHM business. It points to productivity and cost discipline, which can provide opportunities to invest for growth.

The ASX share is also targeting ‘inorganic’ growth.

The underlying average net claims expense per policy unit is forecast to be around 2.3% among resident policyholders in FY22.

Finally, the FY22 health insurance management expenses are expected to be around $530 million. The FY22 productivity target of $15 million in health insurance management expenses is “on track”.

Two of the recent ratings from brokers have been positive.

Ord Minnett rates the business as ‘accumulate’ with a price target of $3.50, implying an upside of around 10%.

Likewise, Credit Suisse rates Medibank as ‘outperform’, with a price target of $3.50. This broker thinks that the current environment is supportive for Medibank earnings.

On Ord Minnett’s numbers, the Medibank share price is valued at 21x FY22’s estimated earnings with a projected grossed-up dividend yield of 5.3%.

Thus, using Credit Suisse numbers, the Medibank share price is valued at 20x FY22’s estimated earnings with a projected grossed-up dividend yield of 6.25%.

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