Paytm Shares: Shares of One97 Communications, which owns and operates digital payments company Paytm, skid over 5 per cent to the day’s low of Rs 931.80 despite favourable views from more than a dozen brokerages following the September quarter earnings.
Fintech major Paytm narrowed its losses for the quarter ended September 2023 to Rs 290 crore compared with Rs 357 crore in the preceding June quarter and Rs 571 crore in the previous year quarter. Revenue from operations during the reporting period jumped 32 per cent year-on-year (YoY) to Rs 2,519 crore. The same stood at Rs 1,914 crore a year ago. EBITDA (before ESOPs) further improved in the second quarter to Rs 153 crore as against Rs 84 crore in the first quarter. Contribution profit for the reporting quarter is up 69 per cent YoY to Rs 1,426 crore, with a contribution margin of 57 per cent.
Paytm shares may have more than doubled from its all-time low of ₹438 earlier in 2023, but it still remains nearly 55 per cent below its IPO price of ₹2,150.
On a year-to-date basis, the stock has rallied 80 per cent, outperforming benchmark Nifty 50, while it has risen 46 per cent in the last one year.
While Yes Securities has maintained a less-than-bullish ‘Add’ rating on Paytm with a revised price target of Rs 1100, Motilal Oswal retained a ‘Buy’ view with a target of Rs 1,160.
Meanwhile, global brokerage firm Bernstein, which had initiated coverage on the stock recently, has an ‘Outperform’ rating on the counter with a target of Rs 1,100 per share. This implies a potential upside of 14 per cent from the current market levels.
Adjusted EBITDA was slightly below analysts’ estimates but Motilal continues to believe that Paytm will achieve earnings breakeven in FY25. The brokerage Motilal Oswal has revised its estimates slightly upwards and expects Paytm to report EBITDA of Rs 790 crore by FY25 as against an earlier estimate of Rs 780 crore.
Motilal said that consistent improvement in contribution margin and operating leverage will continue to drive operating profitability.
Meanwhile, Bernstein said the company continued to show strong growth in the second quarter. The personal loan segment saw muted growth, but the company reported stable margins, progress toward profitability, and healthy payment growth.
Overall EBITDA margin improved led by a higher share of lending revenues, Bernstein said. The fintech major also witnessed QoQ stabilisation of non-direct expenses.
Ahead of Paytm’s Q2 numbers, Jefferies initiated coverage on the counter with a ‘Buy’, citing the company’s increased credit business and the monetisation of its large eco-system. The global brokerage has a target of Rs 1,300 per share on the stock.
Jefferies said the continued momentum in credit originations and margin expansion in payments will upfront profitability ahead of market expectations. “In four quarters, Paytm will enter the global list of large profitable fintechs, and valuations are yet to reflect its changed profile.”
The foreign brokerage had also pointed out regulatory risk, supply pressure from private equity (PE) selling, and deterioration of asset quality, which will impact credit business growth as key risks for the company.
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