Why is the stock price of Rakesh Jhunjhunwala backed Star health up by 57% in a month?

Star Health and Allied Insurance company surges 57% in a month.

The year 2022 started with high volatility amidst the Russia-Ukraine war and high inflation globally. The increase of interest rates by central banks globally has kept the stock market returns subdued. But the last month has seen some surge in stock prices. Rakesh Jhunjhunwala-backed Star Health and Allied Insurance Company stock has rallied 57% in a month. 

Investors are excited about the turnaround in the company. Last year's losses were due to high claims because of covid. It is expected that the normalization of claims will help the company give superior returns. The claim ratio is still high, but if it comes down, the profitability of the company can increase. 

Related: This Rakesh Jhunjhunwala stock gives 15% CAGR over 20 years

Reasons for surge in stock price of Star Health

The reasons for the surge in the stock prices are:-

1. The company has the largest market share in the health insurance sector in India. The 31.6% market share combined with 807 branches and 13000+ network hospitals gives the company an edge in the health insurance sector.
2. Its operating performance is superior to its peers. 
3. Its first quarter results were declared. Net profit increased to Rs 213 crores vs a loss of Rs 209.8 crores in the first quarter last year. The underwriting profit was Rs 156.8 crores vs a loss of Rs 416 crores YOY.
4. The under-penetration in the retail sector gives the investors confidence about future growth prospects. 
5. Normalization of claims post-covid gives the immediate upward triggers to the company’s stock price. 
6. The backing of Rakesh Jhunjhunwala is instilling some confidence in the investors. Although blind following of celebrity investors is a risky thing, Rakesh Jhunjhunwala is widely followed by the Indian investing community. 

Related: Rakesh Jhunjhunwala: Top investing advice from the Mogul of Dalal Street

The stock price of Star Health and Allied Insurance is on an upward trajectory, and the return of 57% in a month has given tremendous confidence to the investors in the stock of the company. This Rakesh Jhunjhunwala stock seems to be in a good uptrend. Motilal Oswal has a buy rating on the stock with a target price of Rs 850. ICICI Securities expects the premiums to increase 20-25% going forward, and their target price is Rs 860. The current market price of the stock is Rs 707.

Star Health Insurance Stock - Complete Analysis by Vivek Singhal

Disclaimer: This article is intended for general information purposes only and should not be construed as investment or legal advice. You should separately obtain independent advice when making decisions in these areas.