Rekha Jhunjhunwala portfolio stock can rally up to 33% in next 12 months: Analyst

Rekha Jhunjhunwala's portfolio stock Star Health and Allied Insurance (Star Health) has gotten a 'Buy' rating with a one-year target price of ₹700. This implies the insurance stock has an upside potential of 33 per cent from the current market price.

Shares of the private health insurer closed 1.73 per cent lower at ₹517.90 apiece in Friday's trade. The stock has fallen 23 per cent in the last one-year period.

Star Health is focusing on a profitable product mix through increasing share of specialised products, claims processing through network hospitals, thrust on profitable banca products and a price hike, highlighted Motilal Oswal in a note.

While individual agents (82 per cent share) will continue to be the bedrock for Star Health, distribution channels such as banca (5 per cent) and digital (9 per cent) will grow at a relatively faster pace with cumulative share likely to rise to 20 per cent in 3-5 years.

The recently announced Expense of Management (EOM) regulation will have positive outcomes for Star Health as most of the competition is above the threshold of 35 per cent/30 per cent for SAHIs/GI players, while Star Health operates well below.

Going ahead, the company aims to optimise commission payouts to agents on the Back-book by linking payout will to the loss ratios of each agent. Also rates could differ on backbook and new business.

Star Health believes that General Insurance (GI) players can offer better value propositions to banca customers than Life insurance (LI) players.

Star Health will soon enter the premium financing business through tie-ups with fintech players without taking any risk on their on their balance sheet.

Anand Rathi has also initiated coverage on Star Health with a target price of ₹723, suggesting an upside of 40 per cent.

The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.