Paytm Q4 results preview: Here's what Citi and other project for revenue, EBITDA and margins

One97 Communications, the parent company of Fintech platform Paytm, is likely to announce its quarterly earnings for the period ended on March 31, 2023. Other than a few names, not many brokerage firms have their projection on the new age internet stock.

Analysts, who are tracking the stock, expect the company to report a strong growth in revenue and gross merchandise value (GMV). Some expect the company to report a strong quarter-on-quarter (QoQ) growth in adjusted EBITDA and EBIT margins, while the company had reported EBITA losses in the same quarter last year.

Paytm is likely to report net loss for another quarter. However, it is seen more than halving on a year-on-year (YoY) basis, while it is set to decline in single digits on a sequential basis.

Paytm is likely to report a decent set of numbers in the March 2023 quarter with further improvement in net payment margins and overall Adjusted EBITDA/EBIT margins, partly aided by recognition of annual UPI payouts from the government in the given quarter, said Citi, while increasing its target price to Rs 1,103 on the stock with a 'buy' rating.

Sustained momentum in lending distribution business as well as a broader focus on monetization imply Paytm is well positioned to clock sustained growth in operating profitability ahead. Recent regulatory announcements are positive for Paytm; resolution of RBI IT-Audit could be key. We think the ongoing funding winter and increasing regulatory requirements for fintech space imply consumer-fintech sees market share consolidation ahead nad big players should benefit, it said.

Citi expects net payment margins at 15.7 basis points (bps), up 240bps QoQ. "We estimate contribution margins at 52.8 per cent and adjusted EBITDA and EBIT margins at 4 per cent and -3 per cent, respectively.

Citi pegs Paytm's revenue at Rs 2,274 crore, up 48 per cent YoY and 10 per cent QoQ, while it's GMV is seen at Rs 362crore, up 40 per cent YoY and 5 per cent QoQ. The fintech major is likely to report and adjusted EBITDA at Rs 86.6 crore in Q4FY23 against a loss of Rs 367.6 crore in Q4FY23 but a rise of 177% QoQ. Its EBITDA margins are seen at 4 per cent, 230 bps on QoQ basis.

The global brokerage firm also estimates a strong growth in digital payments to continue, driven by UPI and credit cards, while its market share is steady for the quarter. It also expects upgrades as the financial services segment is likely to report a robust growth momentum, pushing the topline higher.

Another brokerage firm, Yes Securities expects overall growth in revenue from operations of 17.8 per cent QoQ at Rs 2,430 crore. It sees its EBITDA loss and net loss contracting for the given period.

In its quarterly updates, Paytm said its average monthly transacting users (MTU) stood at 9 crore for January-March 2023 period, up 27 per cent YoY, reflecting the continued expansion of customer base. Merchant Payment Volumes (GMV) for the quarter stood at Rs 3.62 lakh crore, registering a growth of 40 per cent YoY.

The fintech's loan distribution business continued to gain scale with disbursements of Rs 4,468 crore, surging 206 per cent YoY and 41 lakh loans, with a growth of 61 per cent YoY.  In Q4FY23, the total disbursements rose by 253 per cent YoY to Rs 12,554 crore.

During FY23, Paytm reported a 4.6x jump in the value of loans disbursed to reach an annualized run-rate of Rs 50,000 crore. We estimate disbursements to report a steady 64 per cent CAGR over FY23-25, thus driving the mix of financial revenue upwards to 31 per cent, said Motilal Oswal in its initiating coverage report on the stock.

Paytm has achieved a breakeven in adjusted EBITDA during 3QFY23, well ahead of its guidance. We estimate contribution margin to improve to 56.8 per cent by FY25 from 30 per cent in FY22, fueled by improvement in operating leverage and rise in financial business mix, it said with a buy rating and a target price of Rs 865 on the stock.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Business Today)

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