PB Fintech shares fall for second session; should you buy, sell or hold?

According to Rajesh Bhosale – Equity Technical and Derivative Analyst, Angel One, following yesterday’s weakness, the prices witnessed further profit booking in today’s session, however in the second half there was some respite from the lower levels.

“The overall trend is positive for the counter, however prices are now into correction mode, and in the near term there may be some sideways move. Traders in such scenario should consider buying around dip and booking profits at higher levels. 700 is the immediate support whereas 810 is resistance,” added Bhosale.

On Monday, PB Fintech posted its Q1FY24 earnings where the company reported a net consolidated loss of ₹11.9 crore, which was 94% less than the net loss of ₹204 crore reported during the same quarter the previous fiscal year. The company’s total revenues increased 39% year over year, while operating revenue increased 32% to ₹666 crore in the first quarter of FY24 from ₹505 core in the same quarter of FY23.

Also Read: PB Fintech Q1 Results: Net loss narrows 94% YoY to ₹11.9 crore, revenue up 39%

“We are also very pleased that our core engines of value, the new insurance premium of protection (Health + Term), grew at c.40%, and this growth has been accelerating month on month through the quarter,” the statement from PB Fintech said.

What do brokerages say?

Nuvama Institutional Equities 

According to the brokerage, PB Fintech posted impressive results, mostly due to good operating leverage because premium throughput reduced to 23.9% YoY. Revenues and adj. increased by 31.8% YoY due to an improvement in insurance take rate. EBITDA increased to ₹229 million (from ₹660 million in Q1FY23), and decreased by 17.1% quarter-over-quarter. Adjusted EBITDA margin increased to 3.1% from 13.1% in Q1FY23 because to strong operating leverage.

“PB is focused on improving productivity and building trail revenues. We raise our FY24E/25E adj. EBITDA estimates by (13.1%)/137.7%. We further reduce our cost of equity assumption to 13%, rolling forward to Sep-24E to arrive at a DCF-based PB Fintech share price target of ₹720. Maintain ‘Hold’,” said the brokerage.

Kotak Institutional Equities

Revenue growth for PB Fintech’s existing business was significant (39% yoy), while revenue growth for new projects has slowed to 12% yoy on a high base. Due to a shift in the business mix in favour of health and term, the overall commission rate rose to 18% from 17% in 1QFY23. 

Increased exiting business share caused the contribution margin to increase to 33% from 22% in the 1QFY23 and 25% in the 4QFY23. Loss was limited to ₹119 million, down from ₹2,043 million in the first quarter of FY23 ( ₹93 mn in the fourth quarter of FY23). The year over year decrease in ESOP expenses was responsible for about a third of the decrease in losses.

“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. Retain Add; FV ₹800,” said the brokerage.

Updated: 09 Aug 2023, 08:06 PM IST