Star Health and Allied Insurance: Today, the shares of the insurance company Star Health are seeing good growth. The stock has gained more than 4 percent today to reach Rs 494, which closed at Rs 474 on Friday. Brokerage house ICICI Securities has also expressed confidence in the stock and has given investment advice. Earlier, brokerage house Motilal Oswal had also increased the target for the stock. Investors are buying into it from the positive view of the brokerage on the stock. Star Health, the insurance stock included in Rakesh Jhunjhunwala’s portfolio, has seen a massive decline of 37 per cent this year.
Share is at 50% discount
Star Health was listed on the stock market on 10 December 2021. The company had kept the issue price for the IPO at Rs 900, while the stock got listed at Rs 903. On the listing day, it reached a price of Rs 940. This is the all-time high for the stock. Just closed on Friday at Rs 474. That is, since the record high in the stock, there has been a weakness of about 50 percent. At the same time, the stock has weakened by 36 percent from Rs 780 this year. Rakesh Jhunjhunwala owns 17.5 percent stake in the company. His portfolio includes 100,753,935 shares of the company.
HDFC Bank-HDFC merger plan, approval from stock exchanges BSE and NSE, now what next?
Retail Health High Growth Business
Brokerage house ICICI Securities says that retail health is a high growth business with a high entry barrier. This can be gauged from the fact that the retail health premium of Star Health has increased by 20% CAGR in the last 5 years. The company is acting as a market leader in the industry. The company has 550000 agencies and 12,820 hospital network. At the same time, the company has 807 branches in the country. If we look at the GDPI growth range (15-20%) and the combined ratio (93-95%), the company’s PAT in FY24E is expected to be 9.75bn-11.6bn, while the ROE is expected to be 13-16 percent. The brokerage has given a target of Rs 700 while advising to buy in the stock. It can give 48% return as compared to the current price of Rs 474.
Returns better as claim ratio is normal
Brokerage house Motilal Oswal in its recent report had given a new target of Rs 840 while recommending investment in Star Health. With the current price of Rs 474, 77 percent return can be given in it. The brokerage believes that the company will benefit from strong growth in retail health. The earnings growth of the company is also improving as the claim ratio is normal. Star Health’s focus is on driving growth. The company’s premium is expected to increase in the near term. Cyclicality Risk Ltd. A healthy RoE profile (more than 15-17 per cent in the mid-term) is also a positive factor. The brokerage house has put growth estimates in earnings for FY23/FY24 at 6.6 per cent and 5.5 per cent.
(Disclaimer: Stock investment advice is given by the brokerage house. These are not the personal views of The Financial Express. Markets are risky, so take expert opinion before investing.)