This Jhunjhunwala stock is expected to increase 23 percent in a year after receiving two buy calls in a week.
Within a week, two major brokerages assigned buy calls to Star Health and Allied Insurance Company, which is backed by Rakesh Jhunjhunwala. With an 18.21% interest, Jhunjhunwala and his wife Rekha are the company’s second-largest stockholders. With a 47.77 percent interest, Safecrop Investments India LLP is the largest stakeholder.
On March 22, ICICI Direct began coverage of the stock and issued a buy call with a target price of Rs 800, a 23% increase over the current market price of Rs 648.
On March 16, financial services company Motilal Oswal commenced coverage of the stock with a buy call. It set a target price of Rs 750, which is 23% above the current market price of Rs 609.
The target price of Rs 800 was set by ICICI Direct based on the following factors and the latest business news from India.
Star Health is the market leader in retail health insurance, with a 31.3 percent market share in retail GDPI.
With 5.3 lakh agents, it is the largest agency channel, accounting for 77% of all business. Focus on the agency channel, together with smart partnerships with digital ecosystem partners, would allow ICICI Direct to continue solid premium growth, according to the company.
In FY16-20, Star Health regularly provided a combined ratio of 93-95 percent. Covid resulted in greater claims, resulting in underwriting loss, which we expect to normalize starting in FY23E. Strong underwriting and partnerships with hospitals are expected to limit claims, while a focus on operational expenses (via in-house claim settlement and incremental efficiency improvements) is expected to raise profitability and return ratios in the future, according to ICICI Direct.
Premium growth of 23-24% compounded annual growth rate (CAGR) and a focus on underwriting profit, according to the brokerage, are projected to sustain the return on equity ahead of rivals. It said we commence coverage on the stock with a BUY rating.
Meanwhile, the stock surged 1.62 percent intraday on the BSE to Rs 665 from Rs 654.35 at the previous close. On the BSE, a total of 0.11 lakh shares of the company changed hands, resulting in a turnover of Rs 71.86 lakh.
The company’s market capitalization increased to Rs 37,926 crore. On the BSE, the stock afterward finished 0.71 percent higher at Rs 659.
Star Health, according to Motilal Oswal, is the market leader in the Indian health insurance business, with a retail market share of 31%. In comparison to the overall health insurance industry, it is expected to grow at a faster rate.
We estimate Star to report a gross premium CAGR of 25% between FY21 and FY24E, with a loss of Rs 8.3 billion in FY21 and a profit of Rs 10.8 billion in FY24E. We believe the values are acceptable at 32.5x FY24E P/E. To get at a fair valuation of Rs 750, we double the company’s FY24E EPS by 40 “The financial services organization went on to say.
In 2021, the stock made a shaky market debut. On December 10, 2021, shares of Star Health were listed at a discount of nearly 6% to the issue price. On the NSE, the company debuted at Rs 845 per share, down 6.11 percent from the IPO issue price of Rs 900. The business set a price range of Rs 870-900 per share for its shares. The shares debuted on the BSE at Rs 848.80, a 5.68 percent discount to the IPO price.