PB Fintech shares rally 15% to surpass IPO price after 2 years; what's next for the stock?

Shares of PB Fintech surged as much as 15 per cent during the trading session on Wednesday after reporting its first quarterly profit in the December 2023 quarter. However, the rise in the stock met the majority of the target prices given by the brokerage firms amid the rising optimism over profitability.

PB Fintech reported a net profit of Rs 37.2 crore crore for the three months ended on December 31, 2023. The company had reported a net loss of Rs  87.3 crore a year ago, while its bottomline came towards the negative side of Rs 20 crore in the preceding September 2023 quarter.

PB Fintech's revenue from operations registered a healthy growth of 43 per cent year-on-year (YoY) basis to Rs 871 crore in Q3FY24. Revenue from its core business platforms- PolicyBazaar and PaisaBazaar- grew 39 per cent to Rs 593 crore.

The new premium for health and term insurance businesses grew by 44 per cent. The total insurance premium for the quarter was Rs 4,261 crore, with an ARR of Rs 17,000 crore insurance premium. Adjusted EBITDA improved to Rs 76 crore from Rs 26 crore a year ago.

Following the announcement of earnings, shares of PB Fintech surged 14.62 per cent to Rs 1,044.90 on Wednesday, hitting its new 52-week high, with a total valuation more than Rs 46,000 crore. The scrip had settled at Rs 911.60 on Tuesday. The stock raced-past its IPO issue price Rs 980 apiece for the first time in two years.

Brokerage firms have a mixed view on the stock. Some analysts believe that the valuations of PB Fintech stretched and majority of the positives are priced in current valuations. However, a host of brokerages upper their target prices on the counter but the stock has already met them.

PB Fintech continued to deliver strong premium growth. Improved operating leverage, reflecting lower non-core expense growth and ESOP charges, despite QoQ yield compression led to maiden PAT of Rs 37.20 crore against a loss of Rs 21.10 crore in Q2FY24, said Kotak Institutional Equities, which fairly values the stock at Rs 950 apiece.

"PB Fintech benefits from its multi-product offerings, which reduce impact of single major change in industry. We are revising up our estimates. We cut disbursals of Paisabazaar, with higher realization having lower net impact on its income. We moderate fixed expenses, leading to higher EBITDA margins, extrapolating from recent business trends," it said with an 'add' rating.

Another domestic brokerage JM Financial said that PB Fintech reported a healthy YoY growth in core and new initiatives insurance premium despite the quarter seeing relatively tepid insurance industry growth,  Meanwhile, loan disbursals grew 18.5 per cent YoY due to the impact of unsecured disbursals slowdown, it said.

"Consolidated revenue reached Rs 870 crore, with a marginal miss on out estimates. We also noted expansion in adjusted EBITDA margins primarily attributable to new initiatives breaking even at the contribution margin level. This was driven by the company’s strategic focus over the past quarter to onboard retail agents in PB Partners business," it said.

PB Fintech has delivered on the promise of PAT profitability with 9MFY24 PAT at Rs 4.2 crore with seasonally strong Q4 yet to be added. The management remains assertive of its guidance on Rs 1,000 crore PAT in FY27 and we believe there remains a strong possibility of positive surprises, it added with a 'buy' rating and an unchanged target price of Rs 1,010 on the stock

Among the global brokerage firms, Citi has maintained a 'buy' rating on the company and raised target price to Rs 1,150 from Rs 1,035 earlier. Another overseas broker BofA Securities has also inched up its target price to Rs 995 on the stock and maintained its 'buy' tag on the counter.

Disclaimer: Business Today provides stock market news for informational purposes only and should not be construed as investment advice. Readers are encouraged to consult with a qualified financial advisor before making any investment decisions.

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