Sell Go Digit; target of Rs 250: Emkay Global Financial

sell

Emkay Global Financial's research report on Go Digit

Go Digit reported a better set of numbers in Q3FY25 than our estimates, on account of higher inward reinsurance business growth and sharp improvement in Group Health (including PA) underwriting. GWP at Rs26.8bn grew 10% YoY and was 6% above our estimate, whereas Combined Ratio at 108.2% (-2.2ppt YoY) was significantly better than our estimate of 111.1%, driven by better than estimated claims and opex ratios. The claims ratio beat was largely on account of sharp improvement in Group Health (including PA) underwriting, better performance in Fire (including facultative reinsurance) in the absence of Nat Cat, and sustained support from Motor TP reserve releases. To bake in the Q3 developments, we have increased our GWP estimates by ~1-2%, building in improvement of 10-90bps in CoR for FY25-26E which results in 10% increase in PAT for FY25E, while FY26-27E PAT changes by ~1%.

Outlook

Given the company's opportunistic approach toward growth mostly in B2B segments, the predictability and sustained profitability improvement with growth looks challenging. We reiterate SELL with a revised up TP of Rs250, implying FY26E P/E of 40.5x.

For all recommendations report, click here

Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

Go Digit - 23012025 - emkay