Shares of Rakesh Jhunjhunwala-backed Star Health and Allied Insurance Company rose 3 per cent in early trade today after brokerage Motilal Oswal initiated coverage on the stock with a buy call. The financial services firm assigned a target price of Rs 750, 23 per cent higher than the current market price of Rs 609.
Jhunjhunwala and his wife Rekha are the second-largest shareholders in the company with an 18.21 per cent stake. Safecrop Investments India LLP is the biggest shareholder with 47.77 per cent stake.
Star Health stock rose 3.83 per cent intraday to Rs 632.4 on BSE.
The large cap stock has gained after three days of consecutive fall. Star Health shares are trading lower than 5-day, 20-day, 50-day, 100-day and 200-day moving averages. The stock has lost 20 per cent in 2022.
A total of 0.14 lakh shares changed hands amounting to a turnover of Rs 88.32 lakh on BSE. Market cap of the firm rose to Rs 36,185 crore.
"Star Health is the market leader in the Indian health insurance industry, with retail market share of 31%. It is poised to grow at a relatively faster pace vis-a-vis the overall health insurance industry," Motilal Oswal said.
"Going ahead, we expect Star to report a gross premium CAGR of 25 per cent over FY21- 24E, going from loss of Rs 8.3 billion in FY21 to PAT of Rs 10.8 billion in FY24E. At 32.5x FY24E P/E, we find the valuations reasonable. We value the company at 40x FY24E EPS to arrive at fair value of Rs 750," the firm added.
Meanwhile, ICICI Securities is also bullish on the Rakesh Jhunjhunwala-backed firm. It has given a 'Buy' rating on the stock with a target price of Rs 806 per share.
It noted that the company is the leading health insurance player in India with 14 per cent/32 per cent market share in total/retail health insurance segment as of 10MFY22.
"While business sensitivity to loss ratios will be high (as seen in FY21/FY22), the retail focus and growth expectations in new business should help maintain high profit and help STAR to maintain 12/17 per cent RoE over in FY23/24E," the brokerage firm added.
"We value the stock at Rs 806 (50x FY24E P/E and 8x FY24E P/B). These valuations are higher than average multiples for listed multi-line peer (Long term average P/E / P/B is 41x/7x) on account of the higher growth expectations in health segment where STAR has a leadership position," said ICICI Securities.
The stock made a tepid market debut last year.
Shares of Star Health listed at a discount of over 6 per cent to the issue price on December 10,2021. The firm made its debut at Rs 845 per share (down 6.11 per cent) on the NSE against the IPO issue price of Rs 900.
The company offered its shares in a price band of Rs 870-900 per share. On BSE, the stock listed at Rs 848.80, 5.68 per cent lower to the IPO price.
Copyright©2022 Living Media India Limited. For reprint rights: Syndications Today