Star Health and Allied Insurance Company stock has been gaining for the last nine trading days and has jumped 43 percent during the period after Credit Suisse initiated coverage and said it saw an
upside of 20 percent.
Credit Suisse expects the firm's premium growth to pick up in FY23 and also sees a recovery in motor premiums, driven by normalising automobile sales and moderation in pricing.
On Tuesday, the insurer's shares extended gains. At 9:18 am, shares of the health insurance company were trading 2.6 percent higher at Rs 690.35 on the BSE.
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Tuesday's rally also comes after the Goods and Services Tax (GST) Council decided that 5 percent GST would be levied on non-ICU hospital rooms with room rent above Rs 5,000 per day.
A section of the market believes that a higher GST rate would lead to higher premiums, which could discourage people from opting for health insurance. At the same time, the other pocket believes that a higher GST rate might not deter people from renewing or opting for health insurance.
"People will go for health insurance, not because it is less expensive, but because they need it. So, a higher GST rate is highly unlikely to deter them from taking a health insurance cover," said Purvesh Shelatkar, head of institutional broking, Monarch Networth Capital.
Several brokerage firms had initiated coverage on Star Health shares in March, which also hinted at the bullish sentiment for the health insurer.
| Brokerage firm | Rating | Target price |
| Motilal Oswal Financial Services | Buy | Rs 750 |
| CLSA | Buy | Rs 830 |
| ICICI Direct Research | Buy | Rs 800 |
| Credit Suisse | Outperform | Rs 600 |
Motilal Oswal Financial Services had said that Star Health, which is a leader in the health insurance industry with a retail market share of 31 percent, is poised to grow at a relatively faster pace as compared to the overall health insurance industry.
Along with Motilal Oswal, CLSA also said ‘buy’ Star Health shares.
“Star’s innovative products, wide distribution, hospital network, in-house claim management, and focus on the profitable retail segment should support 29 percent compound annual growth rate in premiums over next two years,” CLSA had said in its report dated March 29.
Meanwhile, ICICI Direct Research believes Star Health is expected to maintain its leadership in the retail health segment with sustainable long-term opportunities.
According to market expert Mehraboon J Irani over the past three to four years, insurance stocks have been great compounders. "Just buy them and forget. Insurance is a business that will keep on growing. Good players like Star will be there in the market and will do well. So, it certainly qualifies at the present level as a decent entry point for longer-term investments,” Irani said.
