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Urban Company faces cautious outlook from brokerages
27 Nov
Summary
- Kotak Institutional Equities initiates coverage with a sell rating.
- Company posted a consolidated loss of ₹59.33 crore in September quarter.
- Brokerages cite high investment needs and margin pressures.
Brokerages have signaled growing caution regarding Urban Company, a recently listed home services provider. Kotak Institutional Equities initiated coverage with a sell rating and a target price of ₹120, indicating a belief in limited near-term upside. The company's recent financial results showed a consolidated loss of ₹59.33 crore for the September quarter, a stark contrast to a small profit in the prior year's quarter.
Analysts cite substantial investment requirements and margin pressures as key concerns, despite Urban Company's consistent operational performance. Kotak projects steady annual growth for its India consumer-services business (17%) and faster growth internationally (33%). However, the Insta Help vertical is expected to continue requiring significant investment before reaching profitability.
Risks to this cautious outlook include stronger-than-expected overall growth, intense competition, and rapid improvements in the Insta Help vertical. Other global brokerages, Morgan Stanley and Goldman Sachs, have also initiated coverage with underweight and neutral ratings, respectively, echoing concerns about near-term profitability and investment demands.
