Bernstein maintained its “outperform” rating on PB Fintech, but sharply cut its price target to ₹1,085 per share from ₹2,310 earlier, which is nearly the same as the stock’s closing price on Tuesday. Bernstein’s note earlier this week had projected a 91% upside for the stock.
PB Fintech’s forecasts and price target has been revised by Bernstein, in-line with most other analysts on the street, to reflect the harsher-than-expected commission cut proposal.
According to Bernstein, the reduced take rates in the general insurance business cannot cover its current costs. The business will either scale back from general insurance, thereby becoming a life-insurance focused player, or find alternative models to capture value from lost revenues in the health segment, Bernstein said.
The brokerage added that while mitigation strategies exist, they are hard to quantify / bake-in at this point. It expects some value to be recouped, but it is not in the brokerage’s forecasts.
Bernstein said the point of sales person (POSP) business will scale down.
However, it continues to like what is left of the business from a growth/value creation perspective beyond FY28. It said the next 18 months will be ‘do-or-die’ with a wide range of outcomes possible for PB Fintech.
PB Fintech shares have been on a losing streak for four consecutive sessions ever since the draft Insurance Regulatory and Development Authority of India (IRDAI) guidelines on distribution norms were released last Wednesday, September 23.
The IRDAI has proposed tighter limits on insurers’ management expenses and commission cuts of as much as one-half to two-thirds in health, motor and term insurances. The proposals aim to curb distribution costs and bring greater discipline to the industry.
On Tuesday, brokerages like HSBC downgraded its rating on the stock, while others retained their optimism with “add” and “buy” ratings but cut their price targets significantly. Motilal Oswal and HSBC have cut their target prices on the stock to ₹1,150, which is also its listing price in 2021.
A day prior, Investec, which once had the highest target price on the stock of ₹2,500, cut it sharply by 43% to 1,425.
Of the 25 analysts who have coverage on the PB Fintech stock, 15 have a “buy” recommendation while six have a “hold” and four have a “sell” recommendation.
Shares of PB Fintech ended the previous session 5.8% lower at ₹1,084.5 apiece. The stock has fallen 42.2% in the past month.
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