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Strong top-line growth; operational efficiency drives PAT beat

* PB Fintech (POLICYBZ) reported revenue of INR18.9b (in line), growing 40% YoY, driven by 43% YoY growth in online revenue to INR11.9b (5% beat) and 35% YoY growth in new initiatives revenue to INR6.9b (in line).

* Adj. EBITDA stood at INR1.9b (13% beat; doubling YoY), while Adj. EBITDA margin stood at 9.9% (vs our est. of 9.1%). Core online adjusted EBITDA margin was 18.6% (14.4% in 1QFY26), while for new initiatives, it was negative at 5.2% (-6.0% in 1QFY26).

* Strong revenue growth, along with robust operational efficiency, resulted in a 14% PAT beat, which came in at INR1.6b, up 93% YoY.

* The insurance segment’s 12M trailing core renewal revenue grew 55% YoY and is expected to outpace fresh business growth, which is also likely to maintain healthy momentum, backed by continued protection demand. Management has maintained its guidance of ~3% PAT yield for FY27.

* We have increased our revenue estimates by 3%/2% for FY27/28, considering the 1QFY27 performance. Robust operational efficiency has resulted in a 5%/4% increase in PAT estimates for FY27/28. Uncertainty around commission regulations remains a key risk. We reiterate our Neutral stance with a revised TP of INR1,820 (based on DCF valuation), implying FY28E EV/EBITDA of 49x.

53% YoY growth in protection; core lending recovers

* Core online premium grew 41% YoY to INR57.6b, while new initiative premium grew 42% YoY to INR26.2b.

* Lending disbursal for the quarter was INR43.7b (-38% YoY), of which core online lending at INR27.8b continues to grow sequentially. Secured lending (PB Connect) disbursals declined to INR15.9b (INR49.1b in 1QFY26), as the company discontinued credit from wholesale agents.

* Supported by strong momentum in fresh business, the core online insurance take rate improved to 18.5% (17.9% in 1QFY26), resulting in core insurance revenue growth of 46% YoY to INR10.7b. Core online credit revenue grew 25% YoY to INR1.3b, maintaining a sequential growth trajectory.

* New initiatives revenue grew 35% YoY to INR6.9b, backed by 42% YoY growth in new initiative insurance premiums and improved insurance take rates on a YoY basis. This was offset by a decline in secured lending disbursals to INR15.9b.

* Based on 1Q performance, the annualized run rate for insurance renewal revenue stood at INR10b (INR6.7b in 1QFY26), providing strong visibility for continued revenue growth and margin expansion.

* Contribution profit of INR5.5b (6% beat) grew 48% YoY, reflecting contribution margin of 29.1% (vs our est. of 28.7%).

* ESOP expenses for 1Q were INR470m. Other income was at INR930m

* The PolicyBazaar platform’s registered customer base grew to 158.9m (111.6m in 1QFY26), with transacting customers at 28.1m (21.8m in 1QFY26). The platform has sold 71.6m policies to date.

* The PaisaBazaar platform witnessed 7.8m transacting customers (6.5m in 1QFY26), with 60.6m credit scores accessed and 12.1m transactions to date. 91,000 credit cards were issued during the quarter.

Valuation and view

* POLICYBZ continues to deliver volume growth above its guidance of 30%, driven by GST exemption-led boost in term and health insurance. Strong momentum in the protection segment, along with stronger renewal growth and productivity improvement, resulted in robust profitability. Additionally, the company continues witness recovery in unsecured lending and stable momentum in retail secured lending.

* Over FY26-28, we expect POLICYBZ to post a strong CAGR of 29%/79%/44% in revenue/EBITDA/PAT, factoring in a strengthening position in the underpenetrated credit and insurance industries.

* We have increased our revenue estimates by 3%/2% for FY27/28, considering the 1QFY27 performance. Robust operational efficiency has resulted in a 5%/4% increase in PAT estimates for FY27/28. Uncertainty around commission regulations remains a key risk. We reiterate our Neutral stance with a revised TP of INR1,820 (based on DCF valuation), implying an FY28E EV/EBITDA of 49x.

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