Rekha Jhunjhunwala-Backed Stock Is Slumping After Q4: Why Brokerages See Upto 30% Upside

Shares of Star Health and Allied Insurance Company were trading in the red on Thursday as the company posted its March quarter results.

What Happened: The health insurer reported a 39% increase in its profit after tax (PAT) for the quarter ended March, reaching ₹142 crore compared to ₹102 crore in the corresponding period of the previous year.

For the full year ending March 2024, the company achieved its highest-ever annual profit, with net profit surging by 37% to ₹845 crore, compared to ₹619 crore in FY23.

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Analyst Reactions: Most brokerages remained upbeat on the stock after the company posted its results. HDFC Securities maintained its “buy” rating for the stock with a price target of ₹665. The brokerage firm expects the company to undergo a resurgence in growth, projecting a Compound Annual Growth Rate (CAGR) of around 21% between FY24 and FY26. This growth trajectory is expected to be supported by several factors, including a price increase in its flagship product and a more rigorous underwriting and claims review process, leading to stable loss ratios.

Motilal Oswal also maintained its “buy” rating for the stock with a price target of ₹730. The target indicates an around 30% upside from the current levels of ₹560. The brokerage firm said that the company’s net profit was in line with its estimates. The analysts highlighted that Star Health has been tightening its underwriting standards to prioritise high-quality business. The analysts added that there is a strong growth potential in retail health due to under-penetration in the market.

Kotak Securities also maintained its “add” rating for the stock raising the price target to ₹625 from ₹600. The brokerage said that the insurance major caught up with its guidance by the March quarter even though its performance in H1 was weak. The analysts added that while medical inflation and competition remain headwinds, management seems to be well in place.

Price Action: Star Health’s share price was down 1.33% to trade at ₹564 at the time of writing on Thursday. The Jhunjhunwala family owns an around 17% stake in the company.

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Posted In: EarningsEquitiesNewsPrice TargetReiterationMarketsAnalyst RatingsMoversTrading IdeasStar Health And Allied Insurance Company