This Jhunjhunwala portfolio stock fell 4% today; Rs 200 crore lost within minutes

Jhunjhunwala-backed Star Health and Allied Insurance Company Ltd (Star Health) saw its shares plunging 4 per cent in Wednesday's trade, following a disappointing set of September quarter results. A 35 per cent jump in YoY profit for Star Health missed Street estimates due to higher-than expected claims and expense ratio. The management commentary on loss ratio also dented prospects. In the process, notional value of the 17.3 per cent stake that the Jhunjhunwala family held in the insurance company fell by about Rs 227 crore within minutes into Wednesday's trading session.

The stock fell 3.88 per cent to hit a low of Rs 557.25 in Wednesday's trade. Rekha Jhunjhunwala and late Rakesh Jhunjhunwala owned shares (as per September quarter shareholding data) worth Rs 5,627 crore as of Wednesday's intraday levels against Rs 5,854 a day ago.

Following the quarterly results, analyst have cut Star Health's earnings estimates for FY24 and FY25.

"As compared to the earlier guidance of 63-65 per cent loss ratio, the management now expects to exceed the same given the rising incidences of fever and respiratory diseases. We have cut our EPS estimates 13 per cent/4 per cent for FY24/25 to factor in higher claims ratio and expense ratio as reported in 1HFY24," said Motilal Oswal Securities.

The brokerage said given the long term growth potential for the industry along with investments by Star Health in profitable channels and products, it reiterate 'BUY' call on the stock with a target of Rs 730.

"While increased incidence of monsoon related illnesses seem to have affected near term loss ratios, we expect the full impact of recent price hikes to moderate future losses. We cut our APAT for FY24/25E by 4.1 per cent/3.6 per cent, and reduce our long-term growth rates, resulting in a 7.8 per cent cut to our DCF-based target to Rs 710 (implying FY25E/26E PE of 36.1/29.5 times, earlier target price: Rs 770). Maintain ‘BUY’," Nuvama Institutional Equities said.

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