Rakesh Jhunjhunwala stock Star Health and Allied Insurance Company has rallied more than 50% in a month and analysts see more upside on the stock going forward. After Star Health’s fiscal first quarter results, brokerage firms have maintained their ‘Buy’ ratings, remaining optimistic on the overall prospects of the insurance company. Star Health shares were quoting at Rs 732, down 2.2% on NSE intraday. According to the latest shareholding pattern of Star Health, Rakesh Jhunjhunwala and his wife Rekha Jhunjhunwala hold 14.39% and 3.10% stake respectively as of 30 June 2022. Star Health is among the largest insurer engaged in health insurance segment with relatively superior market share, operating performance.
Should you buy Star Health and Allied Insurance Company shares?
Healthy earnings growth, limited cyclicality risk to boost stock
Analysts at Motilal Oswal remain optimistic about the overall prospects for Star Health, backed by: a strong growth in Retail Health, given its under-penetration; healthy earnings growth, led by normalization in the claims ratio; limited cyclicality risk (Commercial lines and Motor Insurance have high cyclicality); and healthy RoE profile (15-17% over the medium term). “In 1QFY23, although claims were higher than our expectation on the back of COVID-related medical inflation, its Retail Health business continued to grow better than the industry. While we broadly retain our FY24 estimate, we have cut our FY23 EPS by 9% to factor in higher ESOP costs,” they said. The brokerage maintains buy call on the stock with a target price of Rs 850, implying 15% upside from Friday’s closing price.
Star Health to maintain leadership in retail health segment
ICICI Securities also holds a positive outlook on the stock. “Star Health is expected to maintain its leadership in retail health segment with sustainable long term growth opportunity. Steady claims ratio and 20-25% growth in premium to improve combined ratio and support RoE. We maintain a BUY rating on the stock with target price of Rs 860,” the domestic brokerage and research firm said in its note. The brokerage factors 19% premium CAGR between FY22-24, combined ratio of 95, 94% and investment yield of 7%,7.5% for FY23 and FY24 respectively. “We have upgraded our FY24 earnings to factor the renewed confidence in terms of earnings potential seen in the company’s product and distribution strategy,” it said.
Stock down 20% from 52-week high
It is worth noting that Star Health launched its IPO from November 30 to December 2 last year. The issue was not fully booked and received 79% subscription against its offered size. Star Health shares debuted on stock exchanges on 10 December 2021. The stock had hit a 52-week high of Rs 940 apiece during the initial days before correcting. Compared to its 52-week high, Star Health shares have plunged by 20% on NSE as of 31 July 2022. Meanwhile, against its issue price of Rs 900, the stock has dipped by 17%.
(The stock recommendations in this story are by the respective research analysts and brokerage firms. FinancialExpress.com does not bear any responsibility for their investment advice. Capital markets investments are subject to rules and regulations. Please consult your investment advisor before investing.)