Rakesh Jhunjhunwala-backed Star Health and Allied Insurance Company’s share price has tanked nearly 33 per cent from its 52-week high of Rs 940, touched on its debut day in December last year. The stock is down 30 per cent from its IPO price of Rs 900 per share. Jhunjhnwala and his wife held a 17.51 per cent stake or 10.07 crore shares in the company at the end of December 2021 quarter. Despite the 30% correction in share price in three months, ICICI Securities is bullish on this stock. The brokerage firm has given a target price of Rs 806 per share, potential upside of 27 per cent from last close.
While FY21/FY22 have been impacted by covid, ICICI Securities sees good prospects for over 20% premium CAGR in Indian health insurance space till FY30 on the back of structural under-penetration, increasing consumer awareness, and rising affordability. “We see Star Health and Allied Insurance Company well placed to be one of the biggest beneficiaries of the same,” it said.
The company has a strong network of 12,000 hospitals and 737 branches as of 9MFY22 which makes it a dominant franchise in Indian health insurance with significant entry barriers, the brokerage firm said. The investment thesis of Star Health includes market-leading position, product and distribution leadership, attractive financials and strong management. “We value the stock at Rs 806 (50x FY24E P/E and 8x FY24E P/B),” ICICI Securities noted. It also added that these valuations are higher than average multiples for listed multi-line peer (Long term average P/E / P/B is 41x/7x) on account of the higher growth expectations in the health segment where Star Health has a leadership position.
ICICI Securities noted that being a monoline insurance company, risks include higher sensitivity to loss ratios, which can lead to stress in solvency on incidents such as pandemic. Star Health and Allied Insurance Company stock has fallen 18 per cent in one month. On a year-to-date (YTD) basis, it has tanked 18.4 per cent.
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