01 Aug , 2022 By : Kanchan Joshi
Shares of Star Health and Allied Insurance Company have rallied more than 57% in a month and now brokerages see more upside on the stock with Buy ratings after Q1 results as they remain optimistic on the overall prospects of the company.
“We remain optimistic about the overall prospects for Star Health, backed by a strong growth in Retail Health, given its under-penetration, healthy earnings growth, led by normalization in the claims ratio, limited cyclicality risk (Commercial lines and Motor Insurance have high cyclicality), and healthy RoE profile (15-17% over the medium term). In 1QFY23, although claims were higher than our expectation on back of COVID-related medical inflation, its Retail Health business continued to grow better than the industry," said Motilal Oswal.
The brokerage house has a Buy rating on Star Health shares with a target price of Rs850 apiece. The Rakesh Jhunjhunwala portfolio stock is down about 4% in 2022 (YTD) so far.
“Star Health is expected to maintain its leadership in retail health segment with sustainable long term growth opportunity. Steady claims ratio and 20-25% growth in premium to improve combined ratio and support RoE. We maintain a BUY rating on the stock with target price of Rs860," said another domestic brokerage and research firm ICICI Securities.
As per the shareholding pattern on the BSE of Star Health, Indian ace investor and stock market trader Rakesh Jhunjhunwala and his wife Rekha Jhunjhunwala hold 14.39% and 3.10% stake respectively as of June 2022 quarter.
Star Health is among the largest insurer engaged in health insurance segment with relatively superior market share, operating performance. Star Health is a market leader in the retail health insurance segment with around 31.6% market share, as of June 2022. It has 807 branches and 13000 network hospitals.
Its Q1FY23 net profit stood at Rs213 crore versus a loss of Rs209.8 crore in the same quarter last year. Whereas, the company's underwriting profit came at Rs156.8 crore versus a loss of Rs416 crore year-on-year (YoY).
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