PB Fintech slides 10% post Q1 earnings. Should you buy, sell or hold?

Slide in the shares of PB Fintech continued on Wednesday, with the stock falling nearly 10% in the two sessions following its June quarter earnings, where the company narrowed its year-on-year (YoY) losses. On Wednesday, the stock fell 5% in intra-day trade to hit the day’s low of Rs 720 on the NSE.

The Q1FY24 earnings were followed by reports from top brokerages, including one from the Sydney headquartered Macquarie, which foresees an ‘Underperformance’ in the stock.

Among the domestic ones, Nuvama suggested a ‘Hold’ while Kotak Institutional Equities and JM Financial took ‘Add’ and ‘Buy’ stances, respectively.

PB Fintech, which runs Policybazaar and Paisabazaar, on Monday, reported that it had narrowed its losses substantially to Rs 11.9 crore in the quarter ended June 2023. The company had reported a loss of Rs 204 crore in the year-ago quarter. The fintech’s operating revenue rose 32% YoY to Rs 666 crore in the reporting period. It was Rs 505 crore in the corresponding quarter of last year.

The consolidated adjusted EBITDA was a positive Rs 23 crore for the first quarter, an improvement from the negative Rs 66 crore in the same quarter last year.

Here is what top brokerages said:

Macquarie: Underperform | Target: Rs 560
Macquarie has initiated coverage on the stock with an ‘Underperform’ rating.

Kotak: Add | Target: Rs 800
Kotak recommended an ‘Add’ arguing that the Policybazaar business remains on the path to profitability to achieve its stated guidance. It said that the core business was on track though the new initiatives displayed a slowdown, with the management focus on curtailing losses in these segments. “We are not writing-off new initiatives and expect a pick-up over time,” the brokerage said in a note.

Nuvama: Hold | Target: Rs 720
Nuvama recommended a ‘Hold’ on the counter, further reducing its cost of equity assumption to 13% and rolling forward to September 2024E to arrive at a DCF-based target price of Rs 720. It said that the existing business was steady, with the profitability of new initiatives improving. On its June quarter earnings, Nuvama said that PB Fintech reported a strong set of numbers, mainly driven by strong operating leverage, as premium throughput slowed down to 23.9% YoY.

“We raise our FY24E/25E adj. EBITDA estimates by (13.1%)/137.7%,” it said in a note.

JM Financial: Buy | Target: Rs 980
JM Financial believes PB Fintech is in a perfect position to deliver strong growth on topline (28.2% FY23-28 CAGR) along with sharp margin expansion to reach 14.2% adjusted EBITDA margin by FY28.

It has rolled forward to September 2024 and reiterated a buy rating with a target price of Rs 980.

In its post Q4FY23 earning report, JM highlighted margins dipping sharply in new initiatives viz. PB Partners, PB Corporate, and UAE holding lower losses to be largely the reason due to the one-time impact of savings policies being sold last quarter in advance of taxation changes starting April 1st, 2023.

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