IT stock to buy now for an upside of up to 28%; Recommended by Morgan Stanley and Jefferies

Synopsis: Morgan Stanley and Jefferies initiated coverage on Pine Labs with target prices of Rs. 260 and Rs. 300, implying 11% and 28% upside, respectively, forecasting high revenue CAGR and EBIT margin expansion to 20% by FY28 driven by affordability solutions.

The company is a leading Indian merchant commerce platform that provides point-of-sale (POS) solutions, payment processing, and merchant financing services, is now in focus after Morgan Stanley and Jefferies gave targets of 11% and 28% upside, respectively. With a market capitalisation of Rs. 26,818 cr, the shares of Pine Labs Ltd are currently trading at Rs. 234 per share, from its previous close of Rs. 233.65 per share.

Moragn Stanley and Jefferies on Pine Labs

Pine Labs has come into focus after global brokerages Morgan Stanley and Jefferies initiated coverage on the company with a positive outlook. Morgan Stanley assigned an “Equal Weight” rating with a target price of Rs. 260, implying an upside of about 11%, while Jefferies initiated with a “Buy” rating and a higher target of Rs. 300, indicating a potential 28% upside from current levels. 

Both brokerages expect strong revenue growth over the medium term. Morgan Stanley projects a ~19% compound annual growth rate (CAGR) in revenue between FY25 and FY28, while Jefferies is more optimistic, forecasting a 23% CAGR over the same period. This growth is expected to be driven primarily by Pine Labs’ affordability solutions, such as EMI and buy-now-pay-later offerings, along with the continued expansion of its issuing business.

On the profitability front, Morgan Stanley highlights a significant margin expansion opportunity. The brokerage notes that the company’s transition toward an asset-light operating model and a greater focus on higher-margin segments could substantially improve earnings. EBIT margins are expected to rise sharply from around 3% in FY25 to nearly 20% by FY28, with incremental margins potentially exceeding 40–50%, reflecting strong operating leverage as the business scales.

However, the brokerage points out that working capital intensity will remain elevated in the near term, particularly due to the company’s practice of offering instant cashback and incentives. Despite this, the brokerage believes such investments are strategic and will help Pine Labs sustain business momentum, strengthen merchant relationships, and drive long-term growth. 

About the company 

Pine Labs Ltd is a leading fintech company that provides digital payment, merchant commerce, and financial technology solutions. It enables card payments, issuing services, and affordability solutions such as EMIs and cashback programs for merchants, banks, and enterprises across India and international markets.

The company reported strong year-on-year performance for Q2FY26, with sales rising 18% to Rs. 650 crore from Rs. 552 crore in Q1FY26. EBITDA surged 132% to Rs. 75.3 crore, while the company turned profitable with a net profit of Rs. 5.97 crore, compared to a loss of Rs. 32 crore last year. EPS improved to Rs. 0.13, reflecting significant operational and profitability improvement.

Disclaimer

The views and investment tips expressed by investment experts/broking houses/rating agencies on tradebrains.in are their own, and not that of the website or its management. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution while investing or trading in stocks. Trade Brains Technologies Private Limited or the author are not liable for any losses caused as a result of the decision based on this article. Please consult your investment advisor before investing.

The post IT stock to buy now for an upside of up to 28%; Recommended by Morgan Stanley and Jefferies appeared first on Trade Brains.