This Jhunjhunwala stock falls 8% amid high volumes; more correction in offing?

Shares of private health insurer Star Health Insurance Allied Insurance Company Ltd fell over 7% in early trade amid heavy volumes and high turnover today.

The stock slipped 7.66 per cent intraday to Rs 539.20 against the previous close of Rs 583.95 on BSE. It has fallen 3.23% this year and lost 17% in a year.

The market cap of Star Health fell to Rs 31,668 crore on BSE. Total 119.98 lakh shares changed hands amounting to a turnover of Rs 661.50 crore on BSE.

The stock forms part of late investor Rakesh Jhunjhunwala's portfolio. Jhunjhunwala is named as a promoter of Star Health. He (14.25 per cent or 8.28 crore shares) and his wife Rekha Jhunjhunwala (3.07 per cent or 1.78 crore shares) held 17.32 per cent stake in the firm as of the March 2023 quarter, shareholding pattern data on BSE show.

In terms of technicals, the relative strength index (RSI) of the stock stands at 48.4, signaling it's trading neither in the overbought zone nor in the oversold zone. Star Health stock has a one-year beta of 0.3, indicating very low volatility during the period. Star Health shares are trading lower than the 5 day, 20 day, 50 day, 100 day and 200 day moving averages. The firm reported a stellar set of earnings for Q4.

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Abhijeet from Tips2trades said, “ Support for Star Health now stands at Rs 530. Till daily resistance of Rs 570 is not broken on a closing basis, a fall till Rs 530-505 looks possible."

Gaurav Bissa, VP, InCred Equities said, "Star Health has been trading in a 18-month triangle pattern. The stock had earlier reversed from its 55 day EMA on the weekly chart and has seen follow up bearish candles post that. The stock can test triangle support placed at Rs 500 levels which if sustained can lead to a small technical bounce back. Those who are holding the stock are advised to keep a stop loss at Rs 500 whereas those who wish to buy should start accumulating it around Rs 500 levels."

PhillipCapital has initiated coverage on the insurance stock with a target price of Rs 675 per share.

“Star Health is India’s largest standalone health insurer with a market share of 13% as of 9MFY23 (33% in retail health insurance) with built strong virtuous cycle through its market leadership position in agency network, retail health, and by having one of the largest hospitals networks,” said PhillipCapital in a note.

“All these factors feed each other, creating very strong entry barriers for incumbents and new players, based on which we expect Star Health to remain a dominant player in the retail health space. As its loss ratio normalises to pre-covid levels, its combined ratio will improve, driving underwriting performance and profitability. We expect Star Health to deliver a revenue CAGR of 18% over FY22-25 and RoE of 14% in FY25," the note stated.

Anand Rathi initiated coverage on Star Health and Allied Insurance Company with a target price of Rs 723, implying an upside of 40%.

“Star Health is a largest private health insurance company in India with leadership in the retail health segment. They have the largest and well spread distribution networks in the health insurance industry and integrated ecosystem. The company has a focus on innovative and specialized products,” said Anand Rathi in its maiden report on the stock.

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"We remain optimistic about the overall prospects of Star Health and expect overall gross premiums to grow a healthy CAGR over FY 22-24, led by Retail Health. We expect the claims ratios to normalize. This should enable it to return to profitability over FY23-24E. We remain extremely positive on the business model," it added.

In April 2023 end, Star Health and Allied Insurance reported a profit after tax (PAT) of Rs 619 crore in the March 2023 quarter against a loss of Rs 1,041 crore in the corresponding quarter of the previous year.

Sales climbed 11.12% to Rs 2912.52 crore in the March 2023 quarter against Rs 2621.71 crore in the March 2022 quarter. Operating profit zoomed to Rs 134.72 crore for the quarter ended March 2023 against a loss of Rs 116.93 crore in the corresponding quarter of the previous fiscal.

In the last fiscal, profit rose to Rs 618.59 crore against profit of Rs 1040 crore in the previous fiscal. Sales zoomed 14.81% to Rs 11261.59 crore in FY23 against Rs 9809 crore in the previous fiscal. Operating profit surged to Rs 820.70 crore for the March 2023 fiscal against Rs 1404 crore loss in the previous fiscal.

It logged a gross written premium (GWP) of Rs 12,952 crore in FY23 — growth of 13% over the same period a year ago.

Star Health reported a retail health premium of Rs 11,948 crore in FY23 — growth of 18% against FY22. Incorporated in 2005, Star Health offers coverage options for retail health, group health, personal accidents and overseas travel insurance.

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