The second most valuable stock in Rakesh Jhunjhunwala’s portfolio is Star Health and Allied Insurance, a general insurance service provider. Since its launch in the market, the stock of Star Health has almost halved and yet Jhunjhunwala continues to hold on to the stock. It looks like good days are ahead for the investors of Star Health as experts believe that the company is the market leader in the retail health segment. The stock is given a buy rating by analysts at ICICI Securities.
on Wednesday, star health shares closed 475.95 each on the BSE, down 2.24%. At the latest closing price, the company’s market valuation stood at 27,419.49 crores.
Shares of Star Health entered the market on December 10 last year. The stock touched a 52-week high During the initial days before correcting 940 each.
The company launched its IPO From 30 November to 2 December last year. The issue is not fully subscribed and has received 79% subscription of its proposed size.
As compared to its 52-week high, Star Health shares are down at least 49% on BSE as of July 6, 2022. Meanwhile, against the issue price of its IPO 900, the stock has fallen more than 47% to date.
As on March 31, 2022, Rakesh holds 82,882,958 equity shares or 14.40% in Star Health, while his wife Rekha Jhunjhunwala holds 17,870,977 equity shares or 3.11% in the company. Rakesh manages the portfolio of both himself and his wife. The couple’s stake in Star Health is approximately 100,753,935 equity shares or 17.5% as on March 31, 2022. The company is the second largest in terms of both value and percentage in their portfolio.
As per data from Trendline, Jhunjhunwala’s shareholding is rated as: 4,910.2 crores.
ICICI Securities expects Star Health shares to touch 700 points ahead.
In their research note, Anshuman Deb and Ravin Kurva, Research Analysts, ICICI Securities said that retail health is a high-growth business with high entry barriers. This is evidenced by the fact that (1) retail health premium has grown at a CAGR of 20% over the last 5 years and (2) none of the players, except Star Health and Care Health, have been able to significantly increase their market share in the last 5 years. been able to increase. years.
Analysts said, in such an industry scenario, Star is well-established with retail health (31% as on FY23-TD based on monthly GDPI data released by General Insurance Council) and 550k agents, 12,820 network hospitals. and 807 branches. Additionally, the high stake of PSU insurers with low solvency provides growth opportunities for strong players like Star.
According to analysts, except Star Health & Care Insurance (and HDFC Ergo which was SAHI due to the acquisition of Apollo Munich), no company has been able to capture significant market share in the retail health segment. Star/Care Retail Health market share has grown from 23%/4% in FY18 to 33%/7% respectively in FY22.
“We value the stock at 40x (earlier 50x) FY24E EPS with a revised target price of Rs 700 based on 17.5 (earlier 16.7). We expect GDPI CAGR of 16.5% between FY22-24E, investment leverage of 2.3x in FY24E , a combined ratio of 95% and investment yield of 7% for FY24. Our transition to multiple reflects the potential for increased competition, post-COVID waves and an overall increase in cost of capital,” said the analysts. .
Compared to Wednesday’s closing price and the target price of ICICI Securities, the stock has a upside potential of over 47%.