Q3FY24 Review: PB Fintech: Profitable journey begins!

31 Jan 2024 , 10:38 AM

PB Fintech (PBFI) reported Q3 revenue growth of 43% over the year-ago quarter to ~₹8.7 Billion, in line with IIFL’s estimates. Insurance premiums grew 41% over the year-ago quarter (23% sequentially) driven by a strong 44% year-on-year growth in the new premium for Health and Term insurance. 

Credit disbursals moderated, growing 19% over the year-ago quarter. Contribution margins were stable at 30% (down 60 basis points sequentially). EBITDA (ex-ESOP) came in at ₹390 Million, implying an Adjusted EBITDA of 4.5% (versus 1.6% in Q2), despite higher proportion of Health insurance.  Existing initiatives recorded ₹750 Million Adjusted EBITDA during Q3 at 12.8% margins. ESOP costs declined to ₹0.6 Billion (versus ₹1 Billion in Q2), leading to the first quarter of PAT profitability at ₹372 Million (versus PAT loss of ₹214 Million in Q2). 

PBFI remains confident of continuing the momentum in Q4, which is its strongest quarter. Analysts at IIFL Capital Services have increased their FY25-26 EPS estimates by up to 5%; their 12-month DCF based Target Price increases to ₹1,000 (was ₹830) on better growth and margins. Analysts at IIFL Capital Services believe PBFI will continue to deliver at least 2X industry growth and improving profitability over the next three years, resulting in achieving ₹10 Billion+ PAT by FY26.

Key risks: Regulations, Bima Sugam.