Initiating coverage on Star health, Goldman Sachs said it sees more than 21 percent upside in the next 12 months and thus advised its clients to buy the stock.

Star Health is India’s largest standalone health insurer with 14 percent market share in the health segment (FY23), primarily driven by an extensive agency network and years of domain expertise. While analysts expect most private players to benefit from the structural growth in the health segment, Star is best positioned given its competitive moats.

“We initiate with a Buy rating and derive our 12-month target of Rs 770 on P/E of 33 times,” said Shyam Srinivasan, Research Analyst at Goldman Sachs India SPL. “Our bull and bear case analysis implies 44 percent upside and 20 percent downsides, suggesting attractive risk-reward.”

On August 1, the stock traded at Rs 643, up about a percent on BSE.

Over the past decade, Star has tripled its retail health share to 34 percent, and Srinivasan expects this to continue with market share accretion at 40 percent levels, primarily driven by strengthening of its agency force and uptick in agent productivity following doubling of agency network over past 4 years.

He said he expects Star to deliver 21 percent topline growth over FY23-26E, marginally above its guidance. On profitability, a combination of (i) Price hikes, (ii) focus on banca channel, and (iii) product innovation will enable Star to maintain its industry-best combined ratios – in the 93-95 percent range.

Year to date, the stock is up 28 percent outperforming both Sensex and BSE Financial Services. Star Health though has underperformed over the last 3 months due to slower growth vs. industry, and potential negative impact on volumes due to May price hike in their largest product.

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