Brokerage firm Emkay Global has initiated coverage on Go Digit General Insurance after the stock made a muted debut at the Indian bourses by listing at a premium of 5% this week at ₹272 per piece.
The brokerage firm has given ‘sell’ rating, indicating a downside of over 31.4 per cent with a target price of ₹210 per share.
The firm further predicts a significant price correction for the newest entrant on Dalal Street, viewing the company as simply another insurance provider that is demanding exceptionally high valuations.
Also read: Go Digit IPO listing date today. Here’s what GMP, experts say on share debut
“Though we are constructive about growth prospects in Indian GI, we see profitability-related issues in the near-to-medium term. Our SELL is based on expensive valuation for a franchise lacking a meaningful moat/advantage vs incumbents,” the firm said.
It further added, “We initiate coverage with a SELL recommendation, as we see relatively better value in listed private peers like ICICIGI and STARHEAL that have established business models with a track record of profitable growth and much stronger brand & retail franchises.”
According to the brokerage firm, Go Digit lacks a distinct competitive edge compared to Indian general insurance (GI) companies, which primarily acquire business through intermediaries and concentrate on motor and commercial lines. The firm has not successfully transformed its digital superiority into a lasting competitive advantage, resulting in a business model that is not distinct from its competitors.
“With only 6 years into operations, Go Digit has seen significantly high growth on a smaller base; the period also witnessed sigma events such as Covid-19 that had a bearing (positive or negative) on different segments of the GI business . Against this backdrop, Go Digit’s is still an evolving business; currently valued at FY26E P/E of 49.6x and P/B of 5.9, the stock is expensive versus listed peers with an established business model and stronger retail franchise,” it added.
The shares of Go Digit ended Friday’s trading session in red, was down 1.86 per cent to ₹300 per share, against previous close at ₹306 per share.
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Published: 26 May 2024, 02:48 PM IST