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Q4FY23 Review: PB Fintech: Solid print; firmly on track to be PAT positive in FY24

23 May 2023 , 11:27 AM

PB Fintech (PBFI) reported Q4FY23 revenue growth of 61% YoY to ~Rs8.7bn — significantly above IIFLe of 27% YoY. Insurance premiums grew 65% YoY (18% QoQ), while Credit disbursals rose 53% YoY. Change in business mix towards new initiatives led to the contribution margin moderating sequentially to 24.9% (was 26.2% in Q3). PBFI reported the first quarter of positive Ebitda (ex-ESOP) at Rs280mn, implying margins of 3.2% vs -4.6% in Q3. Existing initiatives recorded Rs640mn Ebitda during Q4 at 13% margins. ESOP costs declined to Rs960mn, leading to PAT loss reducing to Rs93mn (vs Rs876mn in Q3). PBFI maintained guidance of turning PAT-positive by FY24 and PAT of Rs10bn by FY27.

Premium and disbursals growth surprise positively: 

Insurance premium grew 65% YoY/18% QoQ to Rs35.9bn, with key segments of Life and Health growing 2x of industry rate. Credit disbursals rose 53% YoY to  Rs33.6bn. Paisabazaar is running at an annual rate of Rs150bn of disbursals and 0.5mn of credit card issuances. Overall revenues grew by 61% YoY to Rs8.7bn, while renewal revenue is annualising at Rs3.88bn (+46% YoY) and will be a key driver of profitability, given that it operates at 85% margins.

On track to achieve PAT profitability in FY24: 

Ebitda (ex-ESOP) turned profitable for the consolidated business at Rs280mn in Q4, implying margins of 3.2% vs -4.6% in Q3. Core business further improved, with adj. Ebitda of Rs640mn; Credit business has been profitable since Dec. Contribution margin for the existing business was steady at 44%, combined with lower losses in new initiatives — leading to overall margins at 24.9%.

Maintain BUY: 

PBFI remains on track to achieve its margin guidance. Analysts of IIFL Securities reiterate BUY with an increased 12-month DCF-based TP of Rs750 (was Rs700), implying 8.6X/5.0X on FY24/26 EV/S and 32X on FY26 P/E. It is trading at 5.2X FY25 EV/S, offering 29% revenue Cagr over FY23-26, vs Indian internet firms at 3.8X EV/S (23% Cagr).

Analysts of IIFL Securities increase their FY24-26 revenue estimates by 1-3%, on strong execution and margin forecasts by up to 100bps. Hence, their 12-month DCF-based TP increases to Rs750 (was Rs700) on roll forward. PBFI continues to deliver on its guidance yet again, which analysts of IIFL Securities believe should increase confidence in their ability to scale the business despite regulatory risks. Valuations have room to re-rate.

Related Tags

  • PB Fintech
  • PB Fintech Q4
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