PB Fintech Stock Price Targets: What CLSA, Citi, Morgan Stanley, Others Say
PB Fintech, the operator of Policybazaar, reported solid quarterly results, with adjusted Ebitda turning positive, in line with management’s guidance. The results, analysts said, were led by both core insurance and credit businesses, as well as lower losses in new initiatives. A couple of foreign brokerage houses believe that valuations for PB Fintech are at comfortable levels. Citi has a target of Rs 820 on the stock. Morgan Stanley finds the stock worth Rs 810 while CLSA values the scratch at Rs 720. Among a handful of domestic brokerages, JM Financial had the highest target price of Rs 980 target. Kotak’s target for the stock was Rs 725 while Nuvama’s at Rs 595. These targets suggest flat to 58 percent upside potential for the stock going forward.
“The stock has corrected significantly since its IPO, providing a good entry point for investors. It absorbed the supply coming from the post-IPO lockup in mid-November 2022 quite well. The fundamental
the overhangs from last year are behind us and we find valuation attractive, said Morgan Stanley.
Key positive catalysts for FY24 include a likely increase in industry lifetime premiums, strong growth in savings for PB Fintech from a small base, and cost containment, Morgan Stanley said. This brokerage noted that the coverage ratio from the quarter saw a slight decline from 26 percent to 25 percent sequentially and was lower than the estimate of 29 percent, given higher than expected business in new initiatives.
“High customer engagement, back-ended profitability in annuity-based commission models, and PB’s early mover advantage leading to high brand recall likely pose lower disruption risk. We refrain from conducting a relative valuation exercise (EV/Ebitda FY26/27E) of PB with other emerging internet stocks at due to differentiated business
model. Globally, large traditional insurance brokers trade at 10-20 times forward PE for a PAT margin of 15-25 percent; as such, PB’s valuation in a nascent marketplace is comfortable,” Citi said.
CLSA said PB Fintech’s performance was stronger than expected with a lower profit before tax loss. Income from the core insurance platform was in line with the PBT pace driven by lower overhead and slightly better credit and other income.
“The burn rate in new initiatives is stabilizing, overhead growth remains contained and we expect core revenue to see a 30 percent CAGR. We raise our estimates by Rs 70-Rs 90 crore over FY24-26CL and expect near PAT breakeven in FY24CL along with PAT of Rs 700 crore by FY26CL. We raise our target price from Rs710 to Rs720 and maintain our outperform recommendation,” CLSA said.
JM Financial, which has the highest price target among the brokerages, said while new initiatives sharply reduced losses with a margin of minus 1 percent, they do not expect that to be sustained in the coming quarters with management guiding towards breaking even for the business. in FY27.
“We believe this is an unusual quarter that should not be used to extrapolate as PB Partners revenue growth (up 97 percent QoQ) was likely driven by strong life insurance sales ahead of changes in tax rules from April 1, 2023. Paisabazaar delivered as expected with disbursements growing at 11 percent QoQ and the business also made EBITDA profitable,” it said.
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