Paytm shares rally 9% on Macquarie upgrade, January business update. Full details

Shares of Paytm jumped 9 per cent in Wednesday's trade after Macquarie double upgraded the stock with a revised target of Rs 800. The scrip also got a lift from January business update, as the company reported a 44 per cent jump in merchant payment volumes (GMV) for January and said loan disbursements stood at Rs 3,928 crore for the month, up 327 per cent.

The scrip rose 9.44 per cent to hit a high of Rs 644.90 on BSE. With this, the stock is up 18 per cent year-to-date.

Macquarie has upped its target on the stock to Rs 800 from Rs 450, as it sees very visible change in approach of the management to deliver profit.  The brokerage has raised its FY23–26E revenue estimates by 33–51 per cent and its target by 80 per cent. The brokerage noted that since its listing at Rs2,150 in mid-November 2021, the Paytm stock is down 70 per cent against a flat Nifty. It said its view on the stock at Rs 600-odd levels now is different from  its view on the stock when it was at Rs 2,150.

"Since our last target price cut, Paytm has positively surprised on the distribution of financial services revenue by a wide margin and has also managed to control overall expenses and charges," it said.

Macquarie said its channel checks with some of the largest lenders/partners of Paytm reveal that the performance of post-paid (95 per cent-plus by volume) as well as personal loans continues to be pretty robust, and the company has now seen several repeat purchases/transactions over the past 12 months, which assures of the quality of these loans.

"Because penetration of post-paid loans and personal loans is just 4 per cent and 0.8 per cent of MTU (monthly transacting users), respectively, the leeway is significant for Paytm to sustain robust growth for the foreseeable future," Macquarie said.

Macquarie has lowered its FY23–25E loss-per-share estimates by 18–72 per cent and raised its target price to Rs 800 from Rs 450, driven by a substantial increase in revenue numbers and a roll-forward to December 2024 from December 2023-based valuation.

Meanwhile, Paytm on Wednesday said its focus over the past few quarters continues to be on payment volumes that generate profitability, either through net payments margin or from direct upsell potential. Paytm said its payments consumer and merchant base offers a large addressable market, thereby providing a long runway for growth, adding that the company is working with its partners to remain focused on the quality of the book.

Also read: Stocks in news: Adani Green, Bharti Airtel, Hero MotoCorp, Ambuja Cements and more

Also read: Paytm share price: Macquarie double upgrades stock, ups target to Rs 800 from Rs 450 earlier