PB Fintech's renewal growth and operating efficiency drive 1QFY27 PAT beat

Investment View and Valuation

Motilal Oswal Financial Services retained its Neutral rating on PB Fintech and revised its target price to Rs 1,820 from its DCF-based valuation. The target implies FY28E EV/EBITDA of 49 times. At the report CMP of Rs 1,620, it indicated 12 per cent upside.

The broker highlighted strong 1QFY27 revenue growth and a profitability beat driven by operating efficiency. The principal risk identified is uncertainty around commission regulations.

1QFY27 Financial Performance

PB Fintech reported 1QFY27 revenue of Rs 1,890 crore, up 40 per cent year on year and in line with MOFSL's estimate. Adjusted EBITDA doubled year on year to Rs 190 crore, exceeding the broker's forecast by 13 per cent, while the adjusted EBITDA margin expanded to 9.9 per cent versus the estimated 9.1 per cent. PAT rose 93 per cent year on year to Rs 160 crore, beating MOFSL's estimate by 14 per cent.

Contribution margin was 29.1 per cent versus the estimated 28.7 per cent. ESOP expense stood at Rs 47 crore and other income was Rs 93 crore.

Core Online Business Remains the Earnings Driver

Core online premium increased 41 per cent year on year to Rs 5,760 crore, while core insurance revenue grew 46 per cent to Rs 1,070 crore. Growth was supported by strong fresh-business momentum and an improvement in the core online insurance take rate to 18.5 per cent from 17.9 per cent in 1QFY26.

Core online adjusted EBITDA margin improved to 18.6 per cent from 14.4 per cent in 1QFY26. Core online credit revenue increased 25 per cent year on year to Rs 130 crore and continued to grow sequentially.

New Initiatives and Lending Trends

New initiatives premium rose 42 per cent year on year to Rs 2,620 crore and revenue grew 35 per cent to Rs 690 crore. However, the adjusted EBITDA margin for new initiatives remained negative at 5.2 per cent, although it improved from negative 6.0 per cent in 1QFY26.

Total lending disbursals fell 38 per cent year on year to Rs 4,370 crore. Core online lending disbursals of Rs 2,780 crore continued to recover sequentially, while secured lending disbursals under PB Connect declined to Rs 1,590 crore from Rs 4,910 crore in 1QFY26 after the company discontinued credit from wholesale agents.

Insurance Renewal Growth and Market-Share Drivers

Management said trailing 12-month core renewal revenue in insurance rose 55 per cent year on year and should outgrow fresh business over the next 12 months, supported by strong new business written over the prior year. The 1QFY27 annualised insurance renewal revenue run rate reached Rs 1,000 crore, compared with Rs 670 crore in 1QFY26. MOFSL views this as supporting visibility on revenue growth and margin expansion.

Management maintained FY27 guidance of around 3 per cent PAT yield. It identified customer acquisition spending, customised products and differentiated claims support as market-share drivers. First-time insurance buyers accounted for 82 per cent of business, while 17,000 health claims were assisted during the quarter.

• Direct motor insurance grew 30 per cent year on year.
• POSP motor insurance grew 50 per cent year on year.
• PB Partners generated GWP of Rs 1,640 crore, up 46 per cent year on year.
• Tier-2 and Tier-3 markets contributed 78 per cent of PB Partners' premiums.

Revised Estimates

Following the 1QFY27 performance, MOFSL raised its FY27E and FY28E revenue estimates by 3 per cent and 2 per cent, respectively. PAT estimates were increased by 5 per cent for FY27E and 4 per cent for FY28E.

MOFSL forecasts EBITDA margin expansion from 7.5 per cent in FY26 to 11.4 per cent in FY27E and 14.4 per cent in FY28E.

Key Risk

The principal risk identified by MOFSL is uncertainty around commission regulations.