Brokerage firm ICICI Securities has maintained a ‘buy’ call on Star Health and Allied Insurance Company, pegging the target price of 700, implying a 47 percent upside. The analyst is given the time period of one year when the stock price can achieve the set target.
Star health was incorporated in the year 2005, providing sterling services in health, personal accident and overseas travel insurance etc.
Shares of Star Health and Allied Insurance closed at Rs. 473/share on the BSE in Friday's trade. In last week, the stock reached a fresh 52-week low of Rs. 469.05.
The stock has dropped 47.55% from its 52-week high of ₹940.10, touched on the day of listing. It has a negative PE and a negative EPS of 29.68 and Rs. 18.08.
The brokerage in its recent report stated that Retail health is a high growth business with high entry barriers. This is proved by the fact that, retail health premiums have grown by 20% CAGR over the last 5 years and no player has been able to grow its market share meaningfully apart from Star Health and Care Health over the last 5 years.
In such an industry scenario, Star Health is a distant market leader in retail health and is well entrenched with 550k agents, 12,820 network hospitals and 807 branches, as per the report.
Additionally, the high share of PSU insurers with low solvency continues to provide a growth opportunity for strong players like Star. Considering a range of GDPI growth (15-20%) and combined ratio (93-95%), possible PAT in FY24E is ₹9.75 bn-11.6 bn and ROE of 13-16%, implying current valuations of 23.5x-28x.“Our estimates factor the lower end of the earnings estimates. We believe the fear of business impact on life insurers selling retail health indemnity is overdone,” it added.
The brokerage firm added, “Retail health insurance is a high growth industry and STAR has a pole position in the same.”
Disclaimer: The views and recommendations made above are those of individual analysts or broking firms and not of MintGenie.