Urban Company gets 'Sell' call from Ambit; brokerage prefers PB Fintech, MakeMyTrip, TBO Tek, Blackbuck, Affle

Ambit has initiated coverage on Urban Company Ltd with a 'Sell' rating and a 12-month target price of Rs 97, citing concerns over margin expansion and increasing competition.

"Urban Company has driven standardization/transparency in India's largely unorganized Rs 5 lakh crore home services market. High service quality and loyal customer base enabled 20 per cent India business CAGR over FY23-26. But further growth depends on non-top8 cities, with top8 penetration already ~51 per cent. Growth will require investments in marketing/service professionals, limiting core India business margin uptick," the brokerage stated.

Ambit noted, "Nascent on demand house help offering (Instahelp) faces competitive intensity and significant cash burn; both unlikely to ease medium term. We see scope for expansion in Instahelp; expect ~6x scale-up over FY26-28 and 40 per cent NTV CAGR over FY26-42. Competition will delay break-even for Instahelp to FY31; we value Instahelp business at Rs 15/sh. We value the business exInstahelp at Rs 82, implying 35x EV/FY28E adj. EBITDA for the core India business."

"Given high competition from Snabbit/Pronto, we build breakeven point for the company in FY31 and exit adj. EBITDA margin of 7 per cent by FY42. Native/International should grow FY26-28 NTV at 37/23 per cent CAGR, respectively, aided by increasing new categories for the Native business, while near-term uncertainty in the Middle East could impact growth in the short/medium term," it also stated.

"On a revenue basis, we build in a 25 per cent/17 per cent CAGR over FY26-28/42, led by the Instahelp business, which should grow at 137 per cent/40 per cent CAGR over FY26-28/42 and contribute 30 per cent of revenues," Ambit further said.

Among internet companies, the brokerage said it prefers PB Fintech, MakeMyTrip, TBO Tek, Blackbuck and Affle.