PB Fintech shares rise 6% after Q4 losses narrow. How to trade now?

The new-age company narrowed its Q4FY23 losses to Rs 8.9 crore as compared to the loss of Rs 220 crore it reported in the same quarter of the last financial year. In the December quarter, the loss stood at Rs 87 crore. Revenue from operations jumped 61% year-on-year (YoY) to Rs 869 crore for the January-March period. The same stood at Rs 540 crore in the corresponding period of last year.

Brokerage firm Morgan Stanley has an ‘overweight’ call on the counter, JM Financial recommended a ‘buy’, Kotak maintained an ‘add’ and Nuvama suggested a ‘hold’ for the stock.

This is what top brokerages recommend:

Morgan Stanley: Overweight | Target: Rs 810
“Good F4Q23 – PBFI achieved adjusted EBITDA break-even, as guided, ahead of MS estimates. Consolidated adjusted EBITDA was Rs 280 mn, vs. MSe of Rs 49mn,” it said.

The brokerage estimated that adjusted EBITDA from additional premiums mobilized in the quarter (on account of tax changes) was ~Rs40-50mn, and hence underlying numbers were still better. “Contributions of such business to premiums and revenues were also low,at Rs 470mn (2% of F4Q premiums) and Rs140-150mn, respectively,” it added.

Kotak Institutional Equities: Add | Target: Rs 725
After the sharp stock price appreciation, the brokerage revised its rating to ‘add’ from ‘buy’ with an FV of Rs 725 from Rs 700 earlier.

“PB Fintech remains on a high growth track and continues to deliver solid growth, with marginally positive EBITDA (before accounting for ESOP expenses) for the first time. Overall growth momentum continues with 4QFY23, augmented by industry tailwinds. Lower contribution losses in its new initiatives and improving leverage will drive profitability over the medium term,” it said.

Nuvama: Hold | Target: Rs 550
Nuvama maintained ‘hold’ rating on the stock with an increased DCF-based TP of Rs 595 from Rs 550.

“The stock is trading at FY24E/25E EV/sales of 9.2X/7.4X. With a market share of 90%-plus in online insurance sales and growing offline presence, the company continues to deliver strong sales along with improving profitability,” it said.

JM Financial: Buy | Target: Rs 980
The brokerage reiterated a ‘buy’ rating with a target price of Rs 980, using a DCF-based valuation approach. “PB Fintech continued its trend of beating estimates by reporting 42.5%/60.9% topline growth on QoQ/YoY basis with revenue reaching Rs 870 crore, a 15.5% beat on JMFe,” it said.

“While New Initiatives (PB Partners, PB Corporate and UAE) lowered losses sharply with contribution margin of -1%, we do not expect that to sustain in the coming quarters with the management guiding towards breaking even this business in FY27,” it added.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)