Jhunjhunwala stock Star Health up 21% in 6 months; here’s why brokerages see more upside

Shares of Star Health and Allied Insurance, a key holding in Rekha Jhunjhunwala’s portfolio, have delivered a 21 per cent return over the past six months on the BSE. On Thursday, however, the stock slipped around 1 per cent to Rs 475.60 in early trade.

The insurer came into focus after its September quarter (Q2FY26) results prompted several brokerages to revisit their outlook. Despite a fall in quarterly profit, most analysts remain optimistic about the stock’s medium-term prospects.

Star Health reported a challenging second quarter, with consolidated profit after tax (PAT) plunging 51 per cent year-on-year to about Rs 550 crore. The sharp decline was largely attributed to an elevated combined ratio of 103.8 per cent, which brokerages said reflected the upfronting of acquisition costs for long-term policies. Under the 1/n accounting rule, commissions are paid upfront, while income is recognized gradually over the policy term.

Jefferies, which maintained a 'Buy' rating with a target price of Rs 650, noted that the loss ratio improved by 130 basis points YoY to 71.5 per cent. It highlighted that long-term policies, which hurt short-term PAT, offer better "persistency/float". The firm sees a potential 25 per cent EPS CAGR over three years, supported by Star's "retail market leadership" and "agency moat".

Motilal Oswal (MOSL) also reiterated a 'Buy' rating with a Rs 570 target price. MOSL pointed out that the 71.5 per cent claims ratio was better than its estimate of 72.5 per cent. Crucially, the brokerage cited a "sharp rise in demand" following the recent GST waiver on health policies, with management reporting "~50 per cent growth in fresh business in Oct'25".

Nuvama, maintaining a 'Buy' call with a Rs 550 target price, calculated that adjusted for 1/n accounting, GWP grew 11.5 per cent YoY.

Despite the earnings miss, analysts pointed to underlying operational improvements. Kotak Institutional Equities termed the reduction in the claims ratio the “best part of the results.” The claims ratio eased by around 130 basis points YoY to 71.5 per cent, signaling early signs of stabilization as the company continues to shed loss-making group business.

Reflecting this, Kotak upgraded its rating on the stock to ‘Add’ from ‘Reduce’, raising the fair value target to Rs 525 from Rs 425. The brokerage cited better medium-term visibility on normalizing claims ratios and marginally higher growth, and projected 18 per cent GWP growth between FY26 and FY28.

IIFL Securities maintained its ‘Buy’ rating with an unchanged target price of Rs 550. While acknowledging the steep PAT drop, IIFL highlighted robust retail GWP growth of about 16 per cent (excluding accounting adjustments) and a 47 per cent decline in low-margin group GWP, reflecting the insurer’s selective underwriting approach. IIFL expects the recent GST correction to positively impact fresh business momentum and persistency trends, and forecasts a 26 per cent earnings CAGR over FY25–27.

In contrast, HDFC Securities adopted a more cautious stance. It retained its ‘Add’ recommendation but with a target price of Rs 463, below the current market level. The brokerage trimmed its PAT estimates for FY26 and FY27 by 16 per cent and 7 per cent, respectively, citing elevated retail loss ratios. HDFC also flagged several structural concerns, including “agency channel fatigue, suboptimal pricing, data quality issues, and weak risk selection.”

Rekha and the late stock investor Rakesh Jhunjhunwala owned a 17.14 per cent stake in Star Health and Allied Insurance Company as of the September quarter.