Shares of Star Health Insurance, which has been in decline for the past 6 months, today (Jan 18) lost more than 5 per cent in a single day. Profit-holders sold on expectations that the company’s revenue growth and profits may have slowed in the third quarter. However, 2 brokerages recommend buying Star Health Insurance shares at the current price.
Headquartered in Chennai, Star Health Insurance was started in 2005. The company has about 33% market share in the retail health insurance industry. The company has a market cap of Rs 32,867 crore. Its network is extensive in South India. Currently there are around 6 lakh insurance agents. It plans to induct around 1 lakh more people as its agents by FY 2023. The average sum assured value of the company’s new policies has risen to Rs 8.7 lakh. The number of direct policy takers through digital is also increasing.
Details of shareholders
As of September quarter, promoters’ share in Star Health Insurance is 58.63%, retail and other investors’ share 29.59%, foreign companies’ investments 10.31%, domestic companies’ investments 1.1%, mutual funds’ shareholding 0.37%.
Revenue and Profit
However, the company had posted losses for 7 consecutive quarters prior to the June quarter. The company’s net profit for the June quarter was Rs 213.25 crore. Net profit fell to Rs 93 crore in the September quarter. However, it is noteworthy that the company posted a loss of Rs 170 crore in the September quarter of 2021. In this case, the December quarter results will be released on January 31. Earlier, the company’s rival ICICI Lampard General Insurance released its December earnings. Despite posting an 11% gain, the company’s shares have fallen 5% in the past 2 days due to increased competition in the sector. The same fear prevails over Star Health Insurance.
Holding shares? Selling?
Domestic brokerage Anand Rathi has set a target price of Rs 723 on Star Health Insurance. Its share price is Rs.537 at the close of trading today (Jan. 18). Anand Rathi predicts a rise of around 25% from this. “The company has grown to become the largest in the overall health insurance market in India. Retail insurance continues to dominate the market. We expect the compound annual growth in overall premiums to remain at a healthy level till FY2024. The claim rate will also decrease. This should help the company return to a profitable path beyond FY2023. We are also very positive about their business model. So we recommend buying the stock.” It has been said.
Motilal Oswal Brokerage also recommends buying the stock. The target price has been fixed at Rs.810. It will take one year to achieve this. The average sum assured amount of premium sold by the company per customer is increasing. They have improved technical facilities to prevent fraudulent claims. These will lead to organizational growth.
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