Rakesh Jhunjhunwala-backed Star Health and Allied Insurance has been on a consistent downtrend since listing in December last year. The stock, currently trading around ₹700, is down 22 percent from its issue price of ₹900 and 18 percent from its listing price of ₹848.80.
While after this consistent decline, global brokerage house CLSA now sees the stock recovering. It has set a 12-month target price of the stock at ₹830, which is below both its issue price as well as its listing price.
According to CLSA, the health insurer's strong position in a fast-growing industry should support its revenue growth and market share gains.
"Star Health's core strengths - innovative product suite, largest individual agent base and in-house-claim management - will continue to support Star in gaining or maintaining market share in a fast-growing industry," it said in a report.
It added that Star's innovative products, wide distribution, hospital network, in-house claim management and focus on the profitable retail segment should support 29 percent CAGR in premiums over the next two years and return on equity expansion to 20 percent in FY24.
The brokerage expects the health insurance industry to expand three times plus in the next five years with gross premiums growing from $4 billion to $12 billion and the net population covered by retail policies to increase from 6 percent to 11 percent. It noted that Star Health has a 32 percent market share in the retail segment and retail premiums are three times larger than the next one.
Meanwhile, ICICI Securities also maintains a bullish stance on the Jhunjhunwala-backed health insurance stock and has given it a target price of ₹806 per share. Meanwhile, MOSL expects Star Health to report a gross premium CAGR of 25 percent over FY21- 24E, going from a loss of ₹830 crore in FY21 to a PAT of ₹1,080 crore in FY24E.
8 analysts polled by Mintgenie also have a 'strong buy' call on the stock.
Jhunjhunwala and his wife Rekha are the second-largest shareholders in the company with an 18.21 percent stake, whereas the biggest shareholder in the firm is Safecrop Investments India LLP with a 47.77 percent stake.
The stock has fallen the most amongst peers, down 17 percent in 2022 YTD, while SBI Life has lost 5 percent, HDFC Life tanked 15 percent, ICICI Prudential shed 11 percent and ICICI Lombard fell 8 percent in the same period.
The initial public offering (IPO) of Star Health and Allied Insurance Company was open for subscription between November 30 and December 2, 2021, at a price band of ₹870-900 per share.