On Wednesday, Citi maintained a Buy rating on PB Fintech Limited (POLICYBZ:IN) and increased the stock price target to INR1,600.00 from INR1,435.00, anticipating positive catalysts from the company's first-quarter performance.
The firm identified several key factors contributing to this optimistic outlook, including sustained growth in retail health and term insurance premiums, improved margins for Point of Sale Persons (POSP), and a steady rise in overall EBITDA margins.
The growth in fresh retail health and term insurance premiums was notable, with the sum assured/premium ratio for individual regular pay policies, excluding SBI Life, reaching approximately 46 times in the first two months of the fiscal year 2025, compared to 41 times in the same period of the previous year for private life insurers.
This trend underscores the robust expansion in the insurance segment that PB Fintech operates in.
Moreover, there has been a continued improvement in POSP margins, benefiting from a favorable comparison with the first half of fiscal year 2024, which experienced muted premiums due to a transition towards more granular POSP agents.
The strong growth in motor insurance is expected to support this margin enhancement, with industry motor Own Damage (OD) premiums showing a 19% year-on-year increase in the first two months of fiscal year 2025. Motor insurance constitutes around 80% of PB Fintech's POSP mix, which positions the company to capitalize on these market dynamics.
The analyst also highlighted the sustained improvement in the company's EBITDA margins, despite aggressive new business trends. Furthermore, there's an anticipated revival in Paisabazaar's disbursements following a weaker fourth quarter.
The combination of business momentum strength and successful execution of the company's phy-gital strategy—integrating physical presence with digital capabilities—has led to the decision to raise PB Fintech's earnings per share (EPS) multiple to 20 times for the fiscal year 2032 estimates, discounted back to the fiscal year 2026 estimates, up from the previous 18 times.
Citi's revised stock price target and sustained Buy rating reflect a confidence in PB Fintech's potential for continued growth and profitability in the near term, as evidenced by its performance indicators and strategic initiatives.
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