Pe of 5 is too pessimistic as per me, as it means the co would trade like a non growth PSU. But going by history 30x PE is also too much. So, IMO considering the execution track record (gaining market share, robust Super app) and growth rates combined with capital allocation strategy, I believe the co would be too cheap if it trades at single digit PE. Personally would be a buy in huge qty if the co comes to 11-13x PE and wouldn’t sell at 17-18x PE. I may sell if goes to 23-25x PE.
One also needs to consider that the co already started investing in people and tech for AMC, which makes the Profit margins appear lower.
The Profit margins and return ratios will improve as the clientele matures (as the Customer Acquistion cost is only for the first year) or the proportion of revenue from clients with more than 1 year goes up .
Anti thesis:
- Any factors leading to loss in market share (seems not a problem at the moment)
- Not getting AMC license (very low probability)
- Any glitches in app/ platform desrupting the customer experience
- Regulatory changes
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