Citing the company’s positioning at an earnings inflection point, global brokerage firm Jefferies has initiated coverage on Pine Labs with a ‘Buy’ rating and a target price of Rs 300. The brokerage highlighted that Pine Labs is expected to benefit from operating leverage, improved profitability, and growth across digital payment segments over the next three years.

Impressively, the brokerage firm has highlighted an upside potential of 28% from Tuesday’s closing price.

In its report, Jefferies projected a 23% compound annual growth rate (CAGR) in revenue between FY25 and FY28, supported by the expansion of Pine Labs’ Digital Checkout Point (DCP) network, increasing digitisation of commercial payments, and strong momentum in the affordability segment, which includes EMI offerings on credit cards and pre-paid card solutions.

It further noted that contribution margins are expected to remain steady in the 76–78% range, while operating efficiencies may lift adjusted EBITDA margins from 15% in FY25 to 27% by FY28.

Jefferies stated that Pine Labs could potentially swing from a net loss of Rs 1.5 billion in FY25 to a net profit of Rs 7 billion by FY28, assuming current growth and efficiency trends sustain.

The report also mentioned that the company’s investments in working capital, including programmes such as Instant Cashback, are expected to continue as part of its business generation strategy.

The brokerage underlined that India’s digital commerce ecosystem is expanding, with the number of merchants accepting digital payments rising from 45 million to 63 million in the past five years.Payments to merchants have also increased significantly, from Rs 29 trillion to Rs 117 trillion. According to Jefferies, Pine Labs is well-positioned to capitalise on this momentum due to its presence across the digital payments value chain, including EMI at point-of-sale, closed and semi-closed loop cards, and DCPs.

It was also highlighted that Pine Labs holds a 70–75% market share in closed/semi-closed loop cards, a 90–95% share in EMI at physical stores, and 15–17% by network and 20–22% by value in the DCP segment. The firm also operates in international markets such as Southeast Asia, the Middle East, Australia, and the US for its prepaid card and gift-card issuance business. Jefferies highlighted a projected 30% CAGR in Gross Transaction Value (GTV) over three years for Pine Labs’ DCP and partnership businesses.

The brokerage believes Pine Labs’ valuation has the potential to re-rate if it delivers consistent growth and improvement in profitability over the forecast period.

Around 10:50 am today, the shares of Pine Labs were trading 4.4% higher at Rs 244.30 on the BSE.

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