Rakesh Jhujhunwala-owned stock Star Health and Allied Insurance Company continued to reel under pressure and hit a new low of Rs 488.55 apiece on the BSE in Thursday’s intra-day trade. The stock of the general insurance company quoted lower for the 12th straight trading day and has slipped 31% from Rs 703.35, touched on June 14, 2022, during the period. The decline in Star Health share price continued despite the company announcing that it had signed an agreement with IDFC FIRST Bank for distribution of its health insurance solutions on June 27. In the last five sessions, Star Health share price has tanked around 10%.
Star Health stock forms part of ace investor Rakesh Jhunjhunwala’s portfolio. He is a promoter of the company. Jhunjhunwala (14.4%) and his wife Rekha Jhunjhunwala (3.11%) held 17.51 per cent stake in the firm as of the 31 March 2022 quarter, according to the shareholding pattern data. In terms of number of shares, the stake translates into 100,753,935 shares of the company. Of the total number of shares, Jhunjhunwala holds 82,882,958 shares and his wife has 17,870,977 shares. Star Health made its stock market debut in December last year, and has corrected 46% from its issue price of Rs 900. At present, the stock is quoting 48% down from its record high level of Rs 940, touched on listing day.
Should you buy Star Health shares?
Emkay Global: Buy | Target price: Rs 945
Despite the steep correction in the stock, Emkay Global has given a ‘buy’ tag with a target price of Rs 945. “Overall, Star Health remains an attractive story in a sunrise sector. In our view, 1-2 quarters of profitable growth delivery will likely lead to a material outperformance of Star Health’s shares. The recent steep fall in the share prices provides an attractive entry point. We have a Buy rating on the stock with a target price of Rs 945,” the brokerage said.
Use correction to buy on dips for the long-term
“Star Health care has witnessed a disappointing stock performance post its listing, falling ~45% from its 52-week high. The company is a leading health insurance player in India having a market share of 32% in the retail segment and 14% in the overall health insurance business. The company has a long runway of growth due to low penetration of health insurance in India, rising out-of-pocket expenditure, inadequate financial protection for unfavorable health occurrences, and increased awareness and affordability. The company’s singular emphasis on health insurance products allows it to create innovative products and deliver excellent customer service,” said Punit Patni, Equity Research Analyst, Swastika Investmart Ltd.
Patni further added, “The company has plans to improve its distribution network by focusing on BANCA & digital channels, improving claim ratio, optimizing OPEX, and keep on introducing innovative products to enhance its profitability. However, investors must be aware of the competitive nature of the industry and being in a mono-line business, the company is subject to black swan events like the covid pandemic. Further, the primary issue of the company was richly priced and the high claim ratios during the pandemic had severely impacted the company, leading to diminishing investors’ interest. Nevertheless, the correction provides an excellent opportunity to buy on dips for the long term and we expect the company to turn profitable in the coming years.”
“Star Health and Allied Insurance Company Limited tanked over 45 per cent from its issue price. Stock prices continue its losing streak for twelve consecutive sessions despite the insurer has signed a corporate agency agreement with IDFC FIRST Bank for distribution of its health insurance solutions. The Company is presence in 25 states and 5 UT of the country and provides various health insurance plans for individuals, senior citizens, and families in India. As of March 31, 2022. Stock prices are trading with Lower-High & Lower Low formation which suggests the negative movement in the prices. At this juncture one should wait for bounce back as the chances are high for the sell-off in this stock,” said Akhilesh Jat, Category Manager – Equity Research.
(The stock recommendation 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.)