Shares of PB Fintech Ltd, the parent company of Policybazaar, dropped over 6% today, trading at ₹1,749.20 as of early market hours. The decline follows a downgrade by Morgan Stanley from ‘Equal Weight’ (EW) to ‘Underweight’ (UW) with a reduced target price of ₹1,400.
Key Factors Behind the Downgrade:
- Strong 2024 Performance: PB Fintech’s stock surged 165% in 2024, significantly outperforming the Sensex, which rose by only 8%.
- Valuation Concerns: Morgan Stanley highlighted the company’s steep valuation, noting that its FY27 EV/adjusted EBITDA multiple of 65x leaves little room for error.
- Demanding Forecasts: The firm cited PB Fintech’s demanding growth expectations as a potential risk.
- Weaker Profit Emergence: Profit emergence has been slower than anticipated, raising concerns about meeting high expectations.
Morgan Stanley’s Take:
The brokerage acknowledged PB Fintech’s strong competitive moat but emphasized that the stock’s massive outperformance in 2024, coupled with steep valuations, poses challenges. The new target price of ₹1,400 implies significant downside from current levels.
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