Policybazaar over Zomato : Betting on Policybazaar stock vis-a-vis Zomato, brokerage and research firm Ambit said that due to good understanding of the sector, success in selling a difficult product and a clear roadmap for profitability, PB Fintech ) for his purchase advice. The brokerage has given a target of Rs 944 per share for this, which is 43 per cent higher than the current levels.
Durable profitability expected after FY25
Ambit said in a note, “Profitability is a matter of choice, not opportunity, as the renewable premium pool (90 per cent plus contribution margin) grows to around 60 per cent of the premium over time. This should translate into sustainable profitability with 35% EBITDA margin and 45% contribution margin after FY25 in a stable position.”
Highlighting the advantages of a strong structure with emphasis on specialized products to digitally enabled brokers like PolicyBazaar, Ambit said that the low penetration and ease of insurance in India are the key reasons for being bullish on it.
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Exit of insurance companies, reduction in commission is the main risk
PB Fintech owns Policybazaar and Paisabazaar, India’s 2 largest online (web aggregator) platforms for insurance and lending products. However, the brokerage sees exits of large insurers, fall in commissions and lapses in the sale of complex insurance products as the main risks for this.
Increase in renewable premium provides profitability
The brokerage said, “In our opinion PB is expected to be profitable by FY25, while Zomato is expected to be profitable in FY27. In addition, the PB business model offers profitability due to increase in renewable premium with contribution margin of 90 per cent. We expect PolicyBazaar’s renewal revenue to grow by 47 per cent (as compared to the current 11 per cent) by FY41.”
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