ICICI Direct has given a buy rating to the Jhunjhunwala stock Star Health and Allied Insurance, for a target price of Rs 850, which implies an upside of 23% from the current levels.
The company is the largest standalone insurer engaged in the health insurance segment with relatively superior market share and operating performance. Star Health has 815 branches and 14000+ network hospitals, with a presence in 25 states and five union territories.
In the Q2 period, the brokerage said the company reported modest growth together with improved market share. Gross written premium( (GWP) trended 10.7% higher year-on-year to Rs 3193 crore. Also, combined ratio at the health insurer registered improvement with underwriting loss at Rs 13.1 crore. The company for the Q2 period logged a net profit of Rs 93.1 crore as against the loss of Rs 170.5 crore year-on-year.
The brokerage values the company at ~2.8x FY24E GDP (58x FY24E EPS) and sees it rally given the following 4 reasons:
Market leadership to be maintained in under-penetrated segment with long term growth opportunity.
With de-growth in the group segment largely done, expect ~10-12% volume based and 8-10% value based growth to aid premium growth at 20-22%.
Improving footprints in rural India, increase in bancassurance tie-up along with strengthening of own agency channel to propel business momentum.
Lower group business and moderation in monsoon related reported claims to keep claim ratio at 62-65%.
The brokerage is of the view that the company would maintain its leadership in the retail health space with long term growth opportunity. “Anticipated growth of 20-25% in the retail health segment coupled with a gradual improvement in claim ratio to further improve combined ratio and support RoE,” noted the brokerage firm.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)
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