A new report from Ord Minnett has reiterated a strong outlook for Medibank Private Ltd (ASX: MPL). The report came following its recent financial results.
Australia's largest insurance provider released full-year results on August 20.
Key results included underlying net profit after tax rising 2.9% to $636.8 million. Additionally, MediBank declared a full-year dividend increase of 6.7% to 19.2 cents per share, fully franked.
The Motley Fool's coverage of the results can be found here.
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What was Ord Minnett's view on the results?
In yesterday's report, Ord Minnett said FY26 revenue and earnings from Medibank were in line with expectations.
However, the lack of policyholder growth in the second-half (2H26) was slightly disappointing.
Revenues increased 6% to $9.1 billion. Underlying net profit after tax (NPAT) of $637 million was up 3% on FY25.
It also noted the company declared a fully franked final dividend of 10.9 cents per share (cps), taking the total FY26 dividend to 19.2 cps, an increase of 7% from FY25.
Focus on policyholders
Ord Minnett also noted the net number of policyholders grew by 1.1% in the year, with Medibank policyholders up 0.6% and ahm up 2.4%, while non-resident policy units fell 2.3%.
In the second-half (2H26), policyholder growth slowed to 0.2%, with the slowdown blamed on cost-of-living pressures, increased switching by customers, and rising competition in the June quarter as some competitors adopted aggressive growth tactics.
While policyholder growth was weak in the 2H26, it is not too dissimilar to growth rates in previous corresponding half-years and is typical of seasonal churn in the industry. Further, the policyholder growth delivered in FY26, should not trigger material downgrades, given consensus estimates ahead of the result had a similar level of policyholder growth, of 1.3% for FY27.
Healthy upside intact for MediBank
Medibank Private shares have dipped over the last few weeks, closing trading yesterday at $4.84.
In yesterday's report, Ord Minnett retained its buy recommendation and $5.10 price target on MediBank Private shares thanks largely to its defensive profile.
We reduce our EPS by 1.5–2.0% per annum in FY27–29 driven by lower policyholder growth and higher cyber litigation costs, partially offset by higher investment income.
Our target price is unchanged at $5.10 as the earnings reductions are offset by an increase to the valuation multiple, following a rise in the price-earnings multiple of the market.
We keep the Buy recommendation viewing MPL as a relatively defensive option for the next 12 months, with circa 5-10% annual EPS growth on our forecasts.
From yesterday's closing price, this target indicates just over 5% upside.
