PB Fintech shares crash 14% in two days; can the insurance player shield your portfolio?

Shares of PB Fintech extended its fall on Wednesday despite the company reporting a strong set for numbers in the quarter ended on June 30, 2023. The parent company of PolicyBazaar and PaisaBazaar had announced its quarterly results on Monday. However, the brokerage firms continue to remain mixed on the new-age internet counter.

Shares of PB Fintech dropped more than 5 per cnet during the trading session on Wednesday to Rs 718.65, compared to its close at Rs 760.35 on Tuesday as the stock settled another 7 per cent lower. The stock has dropped more than 14 per cent in the last two sessions. The company managed to hold a total market capitalization of Rs 32,000 crore.

PB Fintech narrowed its losses substantially to Rs 11.9 crore in the quarter ended June 2023. The Gurugram-based company had reported a loss of Rs 204 crore in the year-ago quarter. The fintech's operating revenue rose 32 per cent year-on-year 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 an operational loss of Rs 66 crore in the same quarter last year. The operating revenue of core online business increased 39 per cent YoY to Rs 516 crore in the June quarter, while contribution margins improved to 45 per cent.

PB Fintech reported a strong set of numbers, mainly driven by strong operating leverage as premium throughput slowed down to

23.9 per cent YoY. An improvement in insurance take rate drove a 31.8 per cent YoY increase in revenues and adjusted EBITDA improved to Rs 22.9 crore. Strong operating leverage drove adjusted EBITDA margin to 3.1 per cent, said Nuvama Institutional Equities.

"PB is focused on improving productivity and building trail revenues. We raise our adjusted EBITDA estimates for the next two fiscals. We further reduce our cost of equity assumption to 13 per cent, rolling forward to September 2024 to arrive at a target price of Rs 720," it added, maintaining a 'hold' rating.

Policybazaar’s core business growth remains on track even as new initiatives slowed down, likely reflecting management focus on curtailing losses in these segments. We are not writing off new initiatives and expect a pick-up over time. The business remains on path to profitability to achieve its stated guidance, said Kotak Institutional Equities while retaining an add with fair value of Rs 800.

Shares of PolicyBazaar have turned multibagger from its 52-week lows. The stock rallied 130 per cent to Rs 816, its 52-week highs on Tuesday, from its lowest levels of Rs 356.2 in November 2022. The stock is up about 65 per cent in the year 2023 so far, it has gained 35 per cent in the last one year.

PB Fintech reported a healthy growth in core insurance premium and loan disbursals for the quarter. Simultaneously, adjusted EBITDA margin improved by 20 bps QoQ to reach 3.4 per cent with the company positioned well to become PAT profitable in FY24 and achieve guidance on Rs 1,000 crore PAT in FY27, said JM Financial.

"Margins dipped sharply in New Initiatives as lower losses were largely due to the one-time impact of savings policies being sold last quarter in advance of taxation changes. We believe that PB Fintech is positioned perfectly to deliver strong growth on topline along with sharp margin expansion," it added with a 'buy' and target of Rs 980, suggesting an upside of about 36 per cent.

 

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