Urban Company Draws Mixed Ratings from Global Brokerages
Urban Company Ltd. has drawn mixed initial coverage from global brokerages, with Morgan Stanley initiating an ‘Underweight’ rating and a target price of Rs 117, while Goldman Sachs has started with a ‘Neutral’ rating and a target of Rs 140.
Morgan Stanley Initiates ‘Underweight’ Rating
Morgan Stanley acknowledges Urban Company’s differentiated business model, large addressable market, and competitive moats, but believes that ‘growth is in the price’, citing supply constraints and near-term profitability drag from investments in InstaHelp.
The brokerage firm expects the company’s core India consumer services NTV to grow at a healthy CAGR of 18-22% over FY25-28, driven by high churn/supply constraints. However, it notes that investments in Instahelp will drag profitability near term.
Goldman Sachs Starts with ‘Neutral’ Rating
Goldman Sachs, on the other hand, highlights the company’s strong execution track record, projecting a 24% revenue CAGR over FY25-30 and sees a long runway for growth compounding, though it notes that premium valuations already reflect much of the optimism.
The brokerage firm believes that the strength of the business model and outlook is already reflected in the company’s premium valuations. It also notes that InstaHelp is an incremental growth driver, but not meaningful to SOTP (yet), and sees optionalities from international segment and B2C products.
Robust Fundamentals and Growth Prospects
Both brokerages agree on the company’s robust fundamentals, with MS calling Urban Company a ‘structural winner’ and GS pointing to optionalities in international and B2C segments.
Urban Company’s large addressable market in online home services, supported by competitive moats and an experienced founding team, is expected to drive growth in the long term. The company’s strong execution track record and robust revenue growth with strong operating leverage are also positives.
Valuation and Target Price
Morgan Stanley has initiated an ‘Underweight’ rating with a target price of Rs 117, while Goldman Sachs has started with a ‘Neutral’ rating and a target of Rs 140.
The scrip fell as much as 3% to Rs 153 apiece, but later pared losses to trade 2.20% lower at Rs 157.83 apiece, as of 09:37 a.m. This compares to a 0.83% advance in the NSE Nifty 50 Index.
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