Shares of Pine Labs surged over 3% on Wednesday, April 15 after global brokerage Citi initiated 'Buy' coverage citing product and distribution growth opportunities. In its recent note, the brokerage has set a target price of Rs 235.
Pine Labs share price advanced 3.33% intraday to Rs 185 apiece. The scrip was trading 1.78% higher by 1:22 a.m. The benchmark NSE Nifty 50 was up 1.55%.
Citi's note stated that Pine Labs has solid leadership as an enterprise fintech provider. In this context, the company has strong growth opportunities as access to affordability solutions rises and providing value-added services built apart from payment services. Both these offers are significantly margin accretive.
In the medium and longterm, Citi believes that innovations across payments continue to emerge and will likely expand the scope of new products or services that merchants and banks will ask of their payment tech partners. It further expects that Pine Labs is well positioned to deliver in terms of innovation.
The continued growth of the company is driven by affordability solutions, value-added services and international expansion. The brokerage projects strong operating leverage for Pine Labs, with profit growth surpassing revenue growth. It further estimates that EBITDA will grow 49% over FY26-28 and 17% revenue growth, primarily led by operating leverage and also steady uptick in contribution margins from affordability and VAS.
The note further highlighted key risks for Pine Labs, which includes intensifying competition, modest ramp up of international expansion, lower-than-expected adoption of affordability and VAS solutions such as card-EMis, instant cashback and early settlement etc. In a broader view, Citi said that India's payments fintech is on a monetisation improvement trajectory, where top players are frimly established in respective core areas of leadership.
While product development will continue across the fintech ecosystem, large players don't face significant disruption risks due to profitability push across the board, rising regulatory costs & compliance requirements, and stickiness borne out of integration into enterprise business workflows. Additonally, when consumer payments has seen a boost in competitive positioning in the past decade, there have been relatively fewer changes in leadership positioning within segments in merchant payments.
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