Rakesh Jhunjhunwala stock gets glowing review but target still lower than IPO price

NEW DELHI: Star Health and Allied Insurance Company, the largest private insurer in the country, got a glowing review from ICICI Securities that said stars are aligned for growth in Indian health insurance, and the company can be a major beneficiary.

Start Health got listed in December but has fallen over 30 per cent from its IPO price of Rs 900. The brokerage firm initiating coverage on the stock said it sees the stock at Rs 806 in the next 12 months, meaning a potential upside of 27 per cent. However, even then it will not be enough to reach the IPO price.

Ansuman Deb of ICICI Securities said the investment thesis of Star Health includes market-leading position, product and distribution leadership, attractive financials and strong management.

“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 the company to maintain 12 per cent/17 per cent RoE over in FY23/24,” he said.

ICICI Securities values the stock at 50x FY24E P/E and 8x FY24E P/B, which are higher than average multiples for listed multi-line peers on account of the higher growth expectations in the health segment where Star has a leadership position.

The last two years have been very difficult for health insurers who saw large outgo due to Covid-19 pandemic. However, the scenario may change going ahead as the pandemic is largely under control.

ICICI Securities said it sees good prospects for over 20 per cent premium CAGR in Indian health insurance space till FY30 on the back of structural under-penetration, increasing consumer awareness, and rising affordability.

Most analysts are bullish on the prospects of the company, according to data available on Refinitiv. Three analysts have a median price target of Rs 965 in 12 months. The highest target pegs the stock at Rs 1,040 and a lowest estimate at Rs 835.