While FY21/FY22 have been impacted by covid, brokerage house ICICI Securities sees good prospects for >20% premium CAGR in Indian health insurance space till FY30 on the back of structural under-penetration, increasing consumer awareness and rising affordability. It sees Star Health and Allied Insurance well placed to be one of the biggest beneficiaries of the same.
Analysts at ICICI Securities have started coverage on the newly listed stock with a Buy rating and a target price of ₹806 per share. The Rakesh Jhunjhunwala-backed company Star Health’s shares made stock market debut in December 2021.
“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 STAR to maintain 12%/17% RoE over in FY23/24E. We value the stock at ₹806. These valuations are higher than average multiples for listed multi-line peer on account of the higher growth expectations in health segment where Star Health has leadership position,” the note stated.
Investment thesis of Star includes market-leading position, product and distribution leadership, attractive financials and strong management. Being a monoline insurance company, risks include higher sensitivity to loss ratios, which can lead to stress in solvency on incidents such as pandemic, ICICI Securities highlighted.
However, the brokerage’s calculation indicates the company will not require fresh capital if it is able to maintain its overall combined ratio at <96%. Further, it believes there is strong potential for 20% annual growth in health premium in India for many years to come.
Star Health, leading private health insurer in the country, is owned by a consortium of investors like Westbridge Capital and Rakesh Jhunjhunwala. Incorporated in 2005, Star Health offers coverage options for retail health, group health, personal accidents and overseas travel insurance.
The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.