Analysts on Dalal Street see up to 16 per cent upside in One97 Communications, which operates Paytm, on hopes of healthy sequential growth in revenue for the September quarter (Q2). On a year-to-date basis, the company’s shares jumped nearly 79 per cent to Rs 949.50 on October 10 from Rs 530.80 on December 30.
Brokerage YES Securities has set a target price of Rs 1,025 for Paytm, indicating an upside of around 8 per cent from the current market price.
“We arrive at an overall growth in revenue from operations of 14 per cent QoQ. We forecast payment processing charges (PPC) as a proportion of payments revenue to be at 54.5 per cent, a metric that was 54.9 per cent in 1QFY24. We arrive at a total expenses (ex PPC) growth of 7 per cent QoQ, compared with a growth of 11 per cent in 1QFY24, resulting in an EBITDA margin (ex other income and after ESOP cost) of -6.6 per cent, an improvement of 591 basis points QoQ,” the brokerage said in a report.
The digital payments platform will announce its Q2 results on October 20, 2023.
On the other hand, Bernstein said that Paytm to continue its strong growth in the lending business (around 50 per cent CAGR between FY23-30). Simultaneously, a rise in payments volume (even as the payment margins decline marginally) will ensure that the business turns profitable in FY25 and achieves an EPS of Rs 130 by FY30. With an upside of nearly 16 per cent, the global wealth management platform has fixed a target price of Rs 1,100 for Paytm.
Motilal Oswal Financial Services (MOFSL) is also positive on Paytm with a target price of Rs 1,000. The brokerage expects operating profit of Paytm to increase in Q2FY23, driven by improvement in contribution margin and operating leverage.
“Gross merchandise value to grow 46 per cent YoY to Rs 4.7 lakh crore in Q2, while the value of loans disbursed is likely to grow 135 per cent YoY and 16 per cent QoQ to Rs 17,200 crore. Revenue from operations may increase by 36 per cent YoY to Rs 2,600 crore. However, contribution profit is estimated to grow 72 per cent YoY to Rs 1,450 crore (contribution margin of 56 per cent). EBITDA before ESOP costs to come in at Rs 175 crore,” Motilal Oswal Financial Services said in a report.
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