Should one buy the PB Fintech dip? Bernstein sees 91% upside but here's what others said

Shares of PB Fintech Ltd. are trading with modest gains of around 2%, having gained as much as 4% on Monday, September 28, after brokerage firm Bernstein projected a 91% upside potential on the stock, maintaining its "outperform" rating with a price target of ₹2,300.

PB Fintech shares sold off sharply last Thursday and Friday, declining 36% on Thursday and another 4% on Friday, after brokerages HSBC and Motilal Oswal cut their price targets on the stock to ₹1,150, which also happens to be the listing price of the stock. The stock also broke below that level on Friday.

While Bernstein retained its optimistic stance, other brokerages continued to cut their price targets on the stock, citing a significant hit to the company's profitability.

Brokerage firm Kotak Institutional Equities maintained its "Add" rating on PB Fintech but cut its price target to ₹1,400 from ₹1,875 earlier.

Kotak said that the stock has sharply corrected, reeling under the pressure of commission caps, that will likely reduce the take rate of the digital business by 35% to 40%.

However, Kotak believes that PB Fintech will be a beneficiary of an industry-wide shift in favour of low-cost digital models, and it also sees some scope for cutting down on expenses, particularly on advertisements and promotions.

Yet, to factor in the recent weakness, Kotak has cut its estimates for PB Fintech by 32% to 44%, stating that clarity on the emerging market landscape in insurance distribution and the company's strategy on the road ahead will be crucial to drive the stock.

Investec Cuts PB Fintech's Target by 43%

Investec, which once had the highest price target on the street at ₹2,500 for PB Fintech, has cut its price target sharply by 43% to ₹1,425, indicating an upside potential of another 20% from current levels.

The brokerage said that PB Fintech's profitability has been deferred by two years due to the IRDAI's draft norms, if they get implemented as proposed.

Investec expects PolicyBazaar's insurance revenue to decline by nearly 50% under the proposed framework. However, the brokerage cited that PB Fintech has meaningful cost levers, which should help mitigate some of the impact.

As the industry consolidates, and the relative cost efficiency of the online channel improves further, PB Fintech should gain as it remains the lowest-cost channel on an EoM basis, Investec wrote in its note.

A key risk to the proposed requirement to provide product information without collecting personal details of customers could weaken lead capture and conversion, Investec said, adding that any dilution to final regulations and growth uptick if PB Fintech gets a lower product pricing than the agency are some upside risks to their thesis.

Yet, Investec has cut its financial year 2028 and 2029 Profit After Tax (PAT) estimates for PB Fintech by 76% and 56% respectively.

25 analysts have coverage on PB Fintech, of which 16 have a "buy" rating, five say "hold" and four have a "sell" rating on the stock.

Shares of PB Fintech are trading 1.9% higher on Monday at ₹1,188.