One 97 Communications Ltd (Paytm) has seen its shares falling over 8 per cent in two days amid the fintech major's March quarter results. But YES Securities believes that the payments business is showing some signs of life and said the repair process has begun, with the rehabilitation of merchant payments business being faster than the consumer payments segment.
"After being under pressure, merchant payments business has started to grow in April and May. On the other hand, monthly transacting users, which drive consumer payments business, are down 25 per cent compared with January. April was the worst month for MTUs but this has stabilised in May. MTU growth will happen once the TPAP commencement happens," YES Securities said.
The domestic brokerage, which suggested a ‘Buy’ on Paytm in March this year, suggested a revised price target of Rs 450 on the stock, as it values Paytm at 2.8 times FY26 price to sales.
Paytm shares plunged 4.28 per cent to hit a low of Rs 339 on BSE. At this price, YES Securities' target price of Rs 450 hints at a potential 32.74 per cent upside ahead.
Foreign brokerage Macquarie has maintained an 'Underperform' rating on Paytm with a target price of Rs 275. JM Financial has a 'Sell' call on the stock with target price of Rs 300. Motilal Oswal Securities retained its 'Neutral rating on the stock with a target price of Rs 400.
YES Securities said the net payments margin is expected to be 5-6 basis points (bps) of gross merchandise value (GMV) going ahead. Excluding UPI incentive, it would be 3-3.5 basis points of GMV. The domestic brokerage said there will be some benefit from MDR-worthy transactions even within the UPI umbrella.
YES Securities said the Paytm management telegraphed June as the quarter when adjusted Ebitda is going to crater. For 4QFY24, Ebitda before ESOP cost including UPI incentive stood Rs 103 crore, which translated to an adjusted Ebitda margin of 4.5 per cent, down 544 bps YoY.
"However, over and above the impact of business discontinuation, the incremental impact on Ebitda due to the temporary disruption in operations would amount to Rs 100-150 crore in Q1FY25. There would also be an incremental Ebitda impact of Rs 75-100 crore, also in 1QFY25, due to the temporary impact of prudent measures taken," it noted.