Rakesh Jhunjhunwala Portfolio: Analysts bullish on this newly listed stock

ICICI Securities analysts have started coverage on the newly listed stock with a buy rating and target price of Rs. 806 per share. Shares of Rakesh Jhunjhunwala-backed company Star Health debuted in the stock market in December 2021.

“While the business sensitivity to loss ratio will be higher (as seen in FY 2011/FY22), the retail focus and growth expectations in new business should help sustain high profits and continue to grow in FY 2013/24E. This should help Star maintain 12%/17% ROE in the U.S. We value stock 806. These valuations are higher than average multiples for the listed multi-line peers due to higher growth expectations in the health segment, where Star Health has a leadership position,” the note said.

Star’s investment thesis encompasses market-leading positioning, product and distribution leadership, attractive financials and strong management. Being a monoline insurance company, risks include high susceptibility to loss ratio, which may stress solvency on events like pandemic, ICICI Securities highlighted.

However, brokerage calculations indicate that the company will not require fresh capital if it is able to maintain its overall combined ratio at < 96%. Furthermore, it recognizes that there is a strong potential for 20% annual growth in health premiums in India for many years to come.

Star Health, the leading private health insurance company in the country, is owned by a consortium of investors like Westbridge Capital and Rakesh Jhunjhunwala. Established in 2005, Star Health offers coverage options for retail health, group health, personal accidents and overseas travel insurance.

The views and recommendations given above are those of individual analysts or broking companies and not of Mint.