This Jhunjhunwala stock zoomed 51% from 52-week low, did you miss the rally?

Shares of Star Health Insurance have zoomed 51% from their 52-week low in just 21 trading sessions or a month. The stock, which forms a part of ace investor Rakesh Jhunjhunwala's portfolio, hit a 52-week low of Rs 469.05 on July 1, 2022.

The Star Health share closed at Rs 710.20 on August 1, delivering 51.41 per cent returns to investors in a month.  However, Star Health Insurance stock is still trading 23.3 per cent lower from the 52-week high of Rs 940 it hit on December 10, 2021.

Rakesh Jhunjhunwala is a promoter of Star Health. He (14.39 per cent or 8.28 crore shares) and his wife Rekha Jhunjhunwala (3.10 per cent or 1.78 crore shares) held 17.49 per cent stake in the firm as of June 2022 quarter, shareholding pattern data show.

Intraday movement

At 11:50 am, the stock was trading at Rs 720.90, up 1.5% today against the previous close of Rs 710.20 on BSE. Star Health Insurance stock touched an intraday high of Rs 724.8, rising 2.06% today. The stock of the private insurer trades higher than the 20-day, 50-day, 100-day and 200-day moving averages but lower than 5-day moving averages.

The share has lost 8.41 per cent in 2022 but gained 3.27 per cent in a week. Total 0.31 lakh shares of the firm changed hands amounting to a turnover of Rs 2.22 crore on BSE. Market cap of the firm rose to Rs 41,536 crore on BSE.

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Shareholding Pattern

In Q1 of this fiscal, 1,73,836 public shareholders held 41.16 per cent or 23.71 crore shares in the firm. Five promoters held 58.84 per cent stake or 33.89 crore shares in the last quarter. 1,72,097 shareholders held 78.46 lakh shares of the firm, amounting to a stake of 1.36 per cent with an individual share capital of up to Rs 2 lakh.

33 public shareholders held 22.62 lakh shares of the firm, amounting to a stake of 0.39 per cent with an individual share capital of over Rs 2 lakh.

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Stellar Q1 Earnings

The company reported a stellar set of earnings for the quarter ended June 2022. It reported a profit of Rs 213.24 crore in the last quarter against Rs 209.78 crore loss in the June quarter of the previous fiscal.

Total income climbed 20.46 per cent to Rs 2,809.01 crore in Q1 against Rs 2,331.90 crore in the corresponding quarter of previous fiscal. On a sequential basis, the firm reported a profit against loss of Rs 82.03 crore in Q4. In Q4 of the previous fiscal, total income stood at Rs 2,740 crore.

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Experts' Take

Here's a look at what brokerage and analysts said on the outlook of the stock.

ICICI Securities has given a target price of Rs 858 for Star Health after Q1 earnings. The earlier target price stood at Rs 700.

"We factor 19% premium CAGR between FY22-24E, combined ratio of 95/94% and investment yield of 7%/7.5% for FY23/24E, respectively. We have upgraded our FY24 earnings to factor  the renewed confidence in terms of earnings potential seen in the company's product and distribution strategy, " said ICICI Securities.

Tirthankar Das, Head of Technical Research, Ashika Group

"The share price of Star Health has formed higher base above 100 DMA and is currently sustaining at higher levels. The stock seems to have formed a base around the major support area of Rs 650-Rs 665 levels which coincides with the 38.2% retracement of the recent rally (High: 772; Low: 470). Among the oscillators the daily MACD is in uptrend and is seen sustaining above its nine periods average thus support the positive bias. Hence it can be expected that the stock to maintain positive bias and head initially towards Rs 770 being an important resistance zone for the past 6 months, breach of which can be considered as a legitimate breakout from a bullish chart pattern indicating the price to start trending higher."

Pavitraa Shetty, Co-founder & Trainer, Tips2Trades

"Due to a very sharp uptrend in global markets including in India, financials have recovered brilliantly including Star Health. Currently Star Health is in a bearish trend again and hence investors should book profits and can expect this stock to fall to Rs 664 or even Rs 620 in the coming days."

Emkay Research has given a buy call on the Star Health stock after Q1 earnings.

The brokerage sees a 26.5% upside to the stock with a target price of Rs 945 in 12 months. The market price at the time of recommendation stood at Rs 747 on July 30.

"Q1 trend and management guidance increases our confidence about the company achieving 96% combined ratio (CoR) in FY23. With Covid-19-led abnormalities in the business behind, by leveraging its moat, Star Health will embark on a long-term profitable growth journey. We reiterate Buy on the stock with an unchanged target price of Rs 945," said Emkay Research.

Dr. Ravi Singh, vice President and head of Research, Share India said, "Star Health's Q1 numbers were in line with the expectations. The company's product strategy is better, which is getting its benefits. The company's market share in retail health is healthy and is growing. However, improvement towards business development around product and distribution will built confidence on further growth. Technically, the stock is testing its support levels with most probability of rebound. Investors may hold their positions for the target of Rs 760 level in the near term."

Jitendra Upadhyay, senior equity research analyst, Bonanza Portfolio Management

"Star Health enjoys strong dominance with in retail health insurance industry with a 33% market share. It drives more than 90% revenue over 2018-22. In this segment, they have clocked 29% CAGR v/s 19% for the overall industry. Going forward, the management expects the retail health segment to grow with 20-25% CAGR over the next two-three years. The key growth drivers will come from increased focus on lower-tier cities, tie up with new banca partners, with an aim to double its share to 8% in FY23, and increased share of digital sales. Healthy earning growth led by normalisation in claim ratio and has limited cyclical risk."

Ajit Mishra, VP - Research, Religare Broking

"The stock has recovered sharply, after spending over one and a half years in the corrective phase. It has reclaimed the major averages as well and is likely to inch gradually higher. It might face a hurdle around Rs 770 levels and then the next level could be closer to Rs 860. In case of any decline, the Rs 650-Rs 675 zone would act as a cushion. Participants should look for buying opportunities on dips."

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