Pine Labs Ltd: Stock pricing in pessimism; OW

Research evidence excerpt

Pine Labs Ltd: Stock pricing in pessimism; OW

GTV 130 180 160 23% -11% 167 -4%

Source: Company data, Morgan Stanley Research (e) estimates

Conference call takeaways:

1. Digital infrastructure and transaction platform revenues (DITP): As per the company, the

contract with oil marketing companies provide visibility of deployment of ~130k terminals,

of which ~50k were deployed in 4Q. While 50k terminals have been deployed they have

not reached their full revenue potential, which management expects to happen over

coming quarters. This provides visibility into segment revenues in F27.

2. Affordability business: This is a sub-segment within the DITP business. As per mgmt.,

the affordability GTV grew at a healthy clip in F26 and take rates have been largely

maintained. The company is increasing its presence into newer segments like premium

eyewear and the two-wheelers category, which would be key growth drivers. This will also

help in diversifying away from the electronics business. The company is signing up with

more non-banking financial companies (NBFCs) to improve credit options for merchants at

the point of purchase of consumers. Further, the company is also working to build the

affordability segment by embedding it within the online payment business.

3. Issuing business: The company talked about new use cases in the issuing business, such

as employee expense management programs, which would unlock new addressable

markets for prepaid processing revenues in India. The company is seeing greater traction

within international markets for the issuing business and provided examples of contract

wins from G Cash Philippines to set up their payment infrastructure layer.

4. Contribution margins: The company expects contribution margins for the consolidated