PB Fintech shares up 113% in 2024 so far; Sell stock, says JM Financial

Shares of PB Fintech Ltd are up 113 per cent in 2024 so far and its valuation looks stretched, said JM Financial, as suggested a 'Sell' on the stock with a target price suggesting double-digit fall over the prevailing level. In a report, the brokerage noted that PB Fintech may require higher capex than what it suggested for its healthcare foray. The move looks well-intended but smells of distraction for PB Fintech, the domestic brokerage said.

JM Financial said the foray may entail significant management bandwidth as the suggested entity is likely to need substantial handholding since inception. The eventual uncertainty is a de-rating event, it said.

PB Fintech highlighted a maximum of $100 million of investment for a 20-35 per cent minority stake in a separate entity with no obligation to invest further. But JM Financial said considering the plans to own 6-8 healthcare facilities before ramping up franchise-led expansion, the entity could require a capital outlay of $350-450 million, depending on the size of the facilities.

"Further investments could be needed to fund operational expenses. We also expect the foray to entail significant management bandwidth as the suggested entity is likely to need substantial handholding since inception. At CMP, we find the valuation stretched at 70 times FY27E PE and hence downgrade the rating to SELL with September 2025 target price of Rs 1,420," it said.

JM Financial said PB Fintech has taken up the onus of solving for the entire health insurance ecosystem and can potentially benefit if this works out as anticipated.

"While the company can potentially have the right people to run this separate entity as well, it still is expected to weigh on management bandwidth as it is their brainchild. Considering the stretched valuation, we believe the eventual uncertainty is a de-rating event and hence downgrade to SELL," it said.