PB Fintech Shares Jump 6% In Early Trading As Brokerages Upbeat After Strong Q4 Show

Shares of PB Fintech jumped as much as 5.7% to INR 654.35 on the BSE during the early trading hours on Tuesday (May 23) after the startup reported upbeat financial results for Q4 FY23 yesterday and announced achieving adjusted EBITDA profitability during the quarter.

Its consolidated net loss narrowed on a year-on-year (YoY) as well as quarter-on-quarter (QoQ) basis to INR 9 Cr in the March quarter of FY23. Operating revenue jumped 61% YoY to INR 869.1 Cr in the quarter.

The company said it is hopeful of posting a profit after tax in FY24.

Growth across its existing business, which includes insurtech vertical Policybazaar and lendingtech vertical Paisabazaar, and new business continued in Q4.

At least three brokerages increased their price targets (PTs) on PB Fintech following the results. 

Analysts at Kotak Institutional Equities raised PT on the company to INR 725 from INR 700 earlier, which implies an upside of over 17% to the stock’s last close on the BSE. The analysts said that lower contribution losses in the company’s new initiatives and improving leverage will drive its profitability over the medium term.

It is pertinent to note that while PB Fintech’s existing business verticals turned profitable on an adjusted EBITDA level, its new business continued to be in the red and posted a loss of INR 36 Cr in Q4. However, this was a decline from INR 90 Cr of adjusted EBITDA loss in the year-ago quarter.

“We believe that intense competition in the life business, with a change in tax rules and increase in maximum bancassurance partnership and increased negotiating power of PB, provide tailwinds to its growth,” said Kotak Institutional Equities.

However, due to a sharp stock price appreciation, the brokerage downgraded PB Fintech to ‘add’ rating from ‘buy’ rating earlier. It also said that though the company remains a “solid play” in the insurance sector, “we prefer to find better trade-offs in the life insurance space at current levels”.

Meanwhile, Citigroup rolled over its PT on the company to INR 820 from INR 800, implying an upside of over 32% to the stock’s last close, observing that its business trajectory remains robust. The brokerage has a ‘buy’ rating on it.

“PB’s end-to-end customer journey model (phy-gital origination, servicing, claims management), market dominance in digital-backed origination, robust tech-backbone, and transitioning monetisation model toward annuity revenues position it in a sweet spot, in our view,” said the Citigroup analysts.

Last year, PB Fintech’s shares fell around 53% on the BSE amid the overall market downturn, sharp fall in valuations of listed tech startups globally, and fears of increasing competition from Bima Sugam.

Following its Q4 results, brokerage CLSA maintained its ‘outperform’ rating and raised PT on PB Fintech to INR 720 from INR 710, which implies an upside of 16.3% to the stock’s last close. 

Of 12 brokerages currently covering the stock, 10 have a ‘buy’ or higher rating on PB Fintech with an average PT of around INR 722.

With an ‘overweight’ rating and PT of INR 810, Morgan Stanley said PB Fintech’s revenue and adjusted EBITDA growth for the credit business could have been even stronger, but the company is deferring part of the revenue toward creating trail income so that the net present value (NPV) is higher while first-year income could be lower. 

“The idea is to get structures in place so as to retain customers for longer, increase life time value and reduce income volatility,” it observed.

PB Fintech’s shares shed some of their gains later in the day and were trading at INR 620.45, marginally up, by 3.10 PM IST on BSE.

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