Motilal Oswal Recommends To Buy This Insurance Stock For 23% Upside, In 1 Year

Reputed brokerage firm Motilal Oswal has recently suggested investors buying the stock of Star Health for a 33% return. About the insurance sector, the firm mentioned, "Only 3.5% of India's population is covered under the retail health insurance plan, and out-of-pocket expenditure is high at 63% (world average of 18%). These statistics indicate a large opportunity for health insurers going ahead."

Target Price

The Current Market Price (CMP) of Star Health is Rs. 609. Motilal Oswal has estimated a Target Price for the stock at Rs. 750. The stock is expected to offer a 23% upside, in 1 year.

Stock Outlook
Current Market Price (CMP)	Rs. 609
Target Price	Rs. 750
1 year return	23.00%

Company performance

With regard to profitability, pre-FY21, the company had been delivering a claims ratio in the range of 60-66% and a combined ratio of 92-94%. The opex ratio saw a sharp improvement to 19.6% in FY21 from 27.8% in FY17. Performance has been better than that of peers. Over FY18-21, STAR has increased its market share in Retail Health by 8.3%. The expense ratio saw a steady decline to 19.6% in FY21 (from 27.8% in FY17) which further declined to 17.6% in 9MFY22, primarily on the back of scale benefits. This was also reflected in healthy average RoE of 18% during FY17-20.

Comments by Motilal Oswal

According to Motilal Oswal, "Star Health, the market leader in the Indian Health Insurance industry, with a retail market share of 31%, is poised to grow at a relatively faster pace vis-à-vis the overall Health Insurance industry. Among the Standalone health insurance companies (SAHIs), Star Health has seen its market share increase to 32% in 10mFY22 (from 20% in FY18). We expect Star to report a gross premium CAGR of 25% over FY21-24E, going from a loss of Rs. 8.3b in FY21 to PAT of Rs. 10.8b in FY24E."

Disclaimer

The above stock was picked from the brokerage report of Motilal Oswal. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.