Shares of Star Health and Allied Insurance have dropped over 9 percent this month. In fact, since its listing in December 2021, the stock has closed only three months with gains including July when it jumped 53 percent.
Year-to-date, the stock has fallen 18.11 percent, as compared to a 7.38 percent rise in the Nifty50.
The stock made its debut at ₹848.80, a 6 percent discount to the issue price of ₹900. However, it soon bounced back and soared to levels near ₹940, eventually closing the first day at ₹906.85.
With Tuesday's closing price of ₹642, the stock has corrected by almost 28.6 percent from its issue price.
Star Health maintained its profitability for the second quarter in a row. The company posted a standalone net profit of ₹93 crore for the second quarter of the current fiscal, compared to a net loss of ₹170.49 crore for the same quarter of the previous fiscal. However, sequentially, the net profit was down by 56 percent.
The revenue from operations in the September quarter rose 10.83 percent year on year to ₹3,002.6 crore. Sequentially, revenue growth came in at 3.82 percent higher.
Following the September quarter earnings, domestic brokerage firm ICICI Direct maintained its “buy” rating on the stock with a target price of ₹850.
ICICI Direct stated that the company is expected to maintain its leadership in the retail health segment with sustainable long-term growth opportunities. "A 20–25% increase in the retail health segment is expected, along with a gradual improvement in the claim ratio, to further improve the combined ratio and support RoE."
Earlier in October, Motilal Oswal issued a "buy" call on the stock with a target price of ₹830. However, the brokerage reduced its earnings estimates for FY23/FY24/FY25 by 2 percent/3 percent/4 percent to factor in weaker-than-expected performance in terms of premium growth.
Analysts at Motilal Oswal are optimistic about the company's continued expansion of its hospital network, which now includes 1,949 hospitals. The company was able to enter into pre-agreed-upon contracts with 1,497 hospitals.
"We expect Star Health to deliver an 18% gross premium CAGR over FY22–25, led by strong growth in retail health insurance." "With increasing losses in the Corporate Health Book, the management has taken a conscious decision to exit certain large corporate businesses, which will lead to a decline in the segment in FY23," said analysts.
Analysts expect the claim ratios to improve with the impact of the pandemic receding. Scale benefits will result in the expense ratio declining by 210 bps over FY22–25E, they say.
Star Health Insurance is present in 26 states and four union Territories. Its distribution network is supported by 807 pan-India branches.
After Titan, Star Health is the second-largest holding in late investor Rakesh Jhunjhunwala's portfolio in terms of value. He and his wife Rekha Jhunjhunwala collectively owned 17.42 percent of the insurance company at the end of September, according to Trendlyne's shareholding data.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie.