Motilal Oswal gave this company a 'Neutral' rating, with a new target price of Rs 125.:Urban Company shares rose 2.9% to trade at ₹113.4 on Tuesday. The company's stock is down approximately 44% from its listing high of ₹201.18.

News Topical, Digital Desk : Shares of home services platform Urban Company rose more than 4% on Tuesday. Motilal Oswal Financial Services initiated coverage on Urban Company. The brokerage firm assigned a "Neutral" rating to the stock, saying the risk-reward appears balanced at current levels.

Motilal Oswal has set a target price of ₹125 per share for Urban Company, implying a potential upside of approximately 14% from the previous closing price. This target is well below the company's listing high of ₹201.

Strong growth expected in the sector

According to the brokerage, India's home services market was worth around $60 billion in FY25. Urbanization, rising incomes, and busy lifestyles are expected to drive rapid growth. Technology-based platforms are addressing the offline market's challenges, such as unstable service quality, unclear pricing, and weak support. Motilal Oswal estimates that the consumer services industry's net transaction value (NTV) could grow at a CAGR of around 17% during FY25-37.

Margin improvement expected, but risks remain The brokerage believes that Urban Company's EBITDA margin could improve by 840 basis points between FY25-37 due to operating leverage, better micro-market expansion, and increased retained users. For valuation, the brokerage has valued the company on a Sum-of-the-Parts (SoTP) basis, with India's consumer business contributing the most. Apart from this, segments like Native (water purifier and smart lock), International Business and InstaHelp have also been given different values.

Investment and competition remain a challenge Motilal Oswal warned that the company will have to continuously invest in onboarding, training and supply expansion, which may lead to cash burn. Apart from this, competition in the market, slow user habit formation and limited penetration are also risk factors. According to the brokerage, “Despite strong growth prospects and market leadership, the risk and return appear balanced at the current valuation.”

Share performance today On Tuesday, Urban Company's share was seen trading at ₹113.4 with a gain of about 2.9%. The company's share is down about 44% from its post-listing high of ₹201.18.