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Emkay Global sees 31% downside in Go Digit stock, gives 'Sell' rating

Go Digit stock: Go Digit's valuation at FY26E P/E of 49.6x and P/B of 5.9x seems to be building-in an optimistic outlook and ignoring the challenges, Emkay Global said

Go Digit

SI Reporter New Delhi

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Go Digit stock news: Domestic brokerage Emkay Global Financial Services has initiated coverage on the recently listed Go Digit stock with a 'Sell' rating and a target price of Rs 210. The target price implies a downside of 31.3 per cent from Thursday's closing price.

The biggest negative for Go Digit, according to Emkay Global, is that the company is "just another General Insurance (GI) player" with an intermediary-driven distribution model and a relatively higher focus on commercial lines and motor, and one that "does not have a clear moat".

Besides, the past five years have seen industry-wide improvement in Motor third party (TP) claims ratio, backed by Covid-19 and the mandatory 5Y/3Y TP policy for new two-wheelers (2Ws)/ passenger vehicles (PVs). Going ahead, the brokerage sees Motor TP claims ratio deteriorating, as a tariff hike is likely to undershoot claims inflation.

"Third, Go Digit's valuation at FY26E P/E of 49.6x and P/B of 5.9x seems to be building-in an optimistic outlook and ignoring the challenges of managing growth with improving profitability. Though we are constructive about growth prospects in Indian GI, we see profitability-related issues in the near-to-medium term," Emkay Global said in its note dated May 24.

Emkay Global is the first brokerage to initiate coverage on Go Digit stock. The stock debuted on the stock exchanges -- BSE, and NSE -- on May 23, 2024. Go Digit stock listed at Rs 281.10 apiece on the BSE as against an issue price of Rs 272. This meant a listing gain of 5 per cent. During the day, it surged to a high of Rs 314, before closing at Rs 305.75 per share.

On the National Stock Exchange, the stock debuted at Rs 286, up 5.15 per cent over the issue price.

According to Shivani Nyati, head of wealth, Swastika Investmart, Go Digit’s position as the fastest-growing private non-life insurer by GWP in India positions it for continued success in the dynamic insurance market.

“The company's advanced technology platform and focus on innovation bode well for its future. Go Digit's moderate listing necessitates a balanced approach from investors. While the company possesses strong long-term potential, careful consideration of the valuation and competitive landscape is crucial. Investors may hold their position by keeping a stop loss at the issue price,” she said.

Go Digit’s initial public offer (IPO), which was a mix of fresh issue of Rs 1,125 crore and an offer for sale of up to 54.77 million shares, was booked nearly 10 times on strong interest from retail and institutional buyers.

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First Published: May 24 2024 | 9:09 AM IST

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