The shares of Pine Labs dropped nearly 3 percent on November 20 after the newly-listed stock received a 'Reduce' rating from Emkay Labs, with a target price below its IPO price.
The stock dropped to Rs 235.10 apiece on Thursday, snapping a two-session gaining streak.
Emkay Global on Pine Labs:
Emkay Global initiated coverage on Pine Labs shares with a 'Reduce' rating and a target price of Rs 210 apiece. This implies a downside potential of more than 13 percent from the stock's previous closing price of Rs 241.87 apiece.
The domestic brokerage said that the company has a strong value proposition in the enterprise POS segment and dominant position in EMI aggregation. However, it expects the competitive intensity to rise in both these segments as adjacent-market players are increasingly targeting these pools.
"In merchant acquisition, industry growth is being led by digitization of small merchants, for whom low-end devices and strong distribution capabilities are crucial success factors. While Pine Labs is ramping up shipments of low-end Mosambee devices, its distribution is still weaker than peers’, limiting its right-to-win in this segment. Its India gift-card business is profitable albeit growth-constrained, while its international business is scaling up rapidly although it operates at low and volatile margins," it said.
Emkay said it sees an unfavorable risk-reward given the rising competition. "We model 19% revenue CAGR for FY25-28E which translates into 53% EBITDA CAGR on a low base. On FY28 estimates, the stock trades at 28.1x EV/EBITDA and 56.4x P/E," it added.
The brokerage believes that Pine Labs faces two structural headwinds – the accelerating shift towards a QR-based acceptance ecosystem and the rising competitive intensity in merchant acquisition. "Given its weaker competitive position vs peers, the maturing nature of its core enterprise POS business and ongoing market-share losses across both POS and affordability, we view risk-reward as unfavorable," it said.
Pine Labs market debut:
The shares of Pine Labs made a decent market debut on November 14, listing at Rs 242 apiece on BSE. This marked a premium of 9.5 percent over the IPO price of Rs 221 apiece. The listing premium has beaten grey market estimates.
This came after the Rs 3,900-crore IPO of the company was subscribed nearly 2.5 times its offer size between November 7 and November 11. The stock's market capitalisation at debut stood at around Rs 27,800 crore.
The stock rose more than 17 percent on its debut day to hit a high of Rs 284 apiece. The stock has now fallen over 17 percent since then, and is below its listing price. Its market capitalisation currently stands at around Rs 27,000 crore.
Follow all LIVE updates about stock markets here.
Disclaimer: The views and investment tips expressed by experts on Moneycontrol are their own and not those of the website or its management. Moneycontrol advises users to check with certified experts before taking any investment decisions.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
Find the best of Al News in one place, specially curated for you every weekend.
Stay on top of the latest tech trends and biggest startup news.
