Urban Company's growth prospects, improving operating efficiency, and investments in InstaHelp have shaped brokerage views. While Goldman Sachs sees stronger growth and margin visibility in the core business, UBS expects improving operating leverage to support long-term earnings. Bank of America remains cautious about near-term losses in InstaHelp.
All three brokerages maintained their ratings, with Goldman Sachs retaining Neutral, UBS maintaining Buy, and BofA sticking to Underperform. Their target prices are Rs 130, Rs 180, and Rs 150, respectively.
Urban Company Q2 Result Highlights (YoY)
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- Net loss widens to Rs 182 crore versus a loss of Rs 59 crore.
- Revenue up 41.3% to Rs 537 crore versus Rs 380 crore.
- EBITDA loss widens to Rs 188 crore versus a loss of Rs 68.7 crore.
- To raise Rs 2,500 crore via equity, debt, and others.
Brokerage Views
Goldman Sachs: Neutral, Target Price Rs 130
- Growth and margins: Net transaction value in the core business could grow faster than the company's guidance of over 20%, with better margin visibility.
- Strengthening core business: Improving service density and partner utilisation are supporting faster user growth.
- Asset-light expansion: The air conditioner foray is unlikely to require significant capital expenditure or alter Native's margin trajectory.
- InstaHelp investment: A large part of the spending is towards market development and could decline over the next few quarters.
- Fundraise: Proceeds could support acquisitions or provide a buffer against intensifying InstaHelp competition. Goldman Sachs does not expect expansion into new product categories or geographies.
UBS: Buy, Target Price Rs 180
- Growth outlook: Greater service density could drive a step-change in growth.
- Earnings potential: UBS sees upside risk to the Rs 1,000 crore Ebitda guidance for fiscal 2031.
- Operating leverage: Benefits are emerging despite higher marketing investments.
- Financial flexibility: The fundraise strengthens the balance sheet and provides room for acquisitions over the next two to three years.
- Breakeven outlook: UBS expects the current cash balance to remain sufficient until the anticipated breakeven in the December quarter of fiscal 2028.
BofA: Underperform, Target Price Rs 150
- Core business: The India business remains steady, with strong traction across segments. Salon Now could expand customer use cases.
- Near-term costs: InstaHelp is likely to continue operating at a deliberate loss as Urban Company seeks to establish the category.
- Air conditioner plans: The company will partner with Amber Enterprises for its air conditioner foray, alongside Native water purifiers, while keeping the business asset-light.
What Investors Should Know
Urban Company's core business offers growth opportunities, but InstaHelp's investment needs and competition remain key risks. UBS is the most positive on long-term earnings, while Goldman Sachs sees balanced prospects and BofA remains cautious about near-term losses.
Also Read: Urban Company Q2 Results: Net Loss More Than Doubles, Revenue Up 41% YoY
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