The broader home services market, worth around $60 billion in FY25, is set to benefit from rising urbanisation, busier lifestyles, and improving income levels, Motilal said in its report. Urban Company operates a hyperlocal online home services marketplace spanning cleaning, repairs, beauty and maintenance.
Motilal estimated Urban Company’s India consumer business’ net transaction value (NTV) to post 17% CAGR over FY25-37 amid rising urbanisation, higher category adoption per cohort, and a gradual rise in online penetration. It expects the segment’s EBITDA margin to improve by 840 bps over FY25-37, driven by operating leverage, better micro-market densification and a higher share of retained users.
“For the India Consumer business, we ascribe a 50x EV/EBITDA multiple, given URBANCO’s strong market share, translating into a per-share value contribution of Rs 85. We value Native at 3x FY28 EV/sales (~20% premium to traditional OEMs) due to its higher growth and differentiated value proposition, resulting in a per-share value of Rs 11. The International business is valued at 2x FY28 EV/sales (per-share value of Rs 5),” the domestic brokerage said in its note.
Motilal believes that InstaHelp, the company’s latest venture which offers maid services, is at an early stage and remains an optionality. “Hence, we value it at 1.5x FY28 EV/NTV (per-share value of Rs 13). Adjusted for cash, we arrive at an SoTP-based price of Rs 125,” it added. The target price implies an upside potential of more than 13.5% from the stock’s previous closing price of Rs 110.13 apiece on NSE.
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Balanced risk-reward at current valuations
“Despite strong structural tailwinds and category leadership, we see a balanced risk-reward at current valuations given gradual habit formation, penetration, potential competitive risks, and investment-led margin trade-offs; hence, we initiate coverage with a Neutral rating,” the domestic brokerage concluded, saying that the stock offers “convenience at a pricey valuation”.
Urban Company shares made a bumper market debut in September last year, listing at Rs 162.25 apiece on NSE at a premium of more than 57% over the IPO price. The stock has fallen around 32% from its listing price, but is up 7% from its IPO price of Rs 103 apiece.
The shares of the recently listed company jumped around 3% to Rs 112.95 apiece on Tuesday morning.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)