PB Fintech surges 13%, hits 2-year high on first quarterly profit in Q3

Shares of PB Fintech, the parent of online insurance aggregator Policybazaar, hit a two-year high of Rs 1,032.95, as they rallied 13 per cent on the BSE in Wednesday's intra-day trade after the company posted a net profit of Rs 37 crore in December 2023 (Q3FY24) against a net loss of Rs 87 crore a year ago. The company reported its first quarterly profit since listing, as growing demand for insurance boosted revenue.

The stock of a fintech company was trading at its highest level since January 2022. It had hit a record high of Rs 1,470 on November 17, 2021.

The company's revenue grew 43 per cent year-on-year (YoY) to Rs 871 crore. The company's core online revenue grew 39 per cent YoY to Rs 593 crore. Adjusted earnings before interest, taxes, depreciation, and amortization (Ebitda) margin (Core) improved to 13 per cent up from 6 per cent in a year ago quarter.

PB Fintech reported 41 per cent YoY and 23 per cent quarter-on-Quarter (QoQ) growth in premium and 19 per cent YoY (down 23 per cent QoQ) growth in credit disbursals. With moderation in calculated commission yields to 17 per cent from 19 per cent in Q3FY23 and Q2FY24, revenue growth was somewhat lower. While contribution margin was steady, low growth in noncore expenses led to EBITDA of Rs 39 crore from Rs 13 crore in Q2FY24.

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 profit after tax (PAT), analysts at Kotak Securities said.

PB Fintech has guided for Rs 1,000 crore of PAT in FY2027E. High (2X industry growth) coupled with moderate growth in non-core expenses, lower losses of new initiatives and ESOP charges will be drivers of its profitability.

“With tailwinds of being the unparalleled digitally-enabled distributor, our model bakes in ~25 per cent CAGR in premium (28-30 per cent CAGR in renewal premium) for the following five years, with higher earnings CAGR due to leverage benefits. This will likely ensure rich valuation multiples for PB Fintech, after turning profitable,” the brokerage firm said in the result update.

“With Paisabazaar impacted and the company focused on driving PB Partners business growth via retail agents, we tweak estimates to marginally lower revenue. However, we improve EBITDA margin estimates with New Initiatives at Contribution margin break even and higher renewals mix expected,” analysts at JM Financial Institutional Securities said.