Shares of One97 Communications Ltd (Paytm) jumped 5% on NSE in Monday's trade, rallying for the sixth straight day. The latest rise in Paytm share price was seen as a host of foreign brokerages stayed optimistic on the stock post the company's Q4FY23 results
After reporting unchanged credit metrics for five consecutive quarters, Paytm reported an improvement in ECL (expected credit losses) in its BNPL (buy now pay later) portfolio and a reduction in bounce rates across its BNPL and personal loan portfolios for the first time, Goldman Sachs said in a note
So far this year, Paytm share price has rallied more than 35%, outperforming benchmark Nifty 50. In the last one year, Paytm share price has jumped around 30%. The stock is trading 45% higher than its 52-week low of Rs 438
According to analysts at Goldman Sachs, sustainability of Paytm’s credit metrics has been a key investor concern, and the results should help build confidence around the scalability of the company’s lending book. The brokerage has set a target of Rs 1,150 on the stock
"We believe these results should largely put to rest debates around Paytm’s business model traction and profitability, and we see resolution of outstanding regulatory issues (ban on PPBL and online merchant onboarding) as the next set of catalysts for the stock," Goldman Sachs said
Another foreign brokerage Citi said that Paytm has several profitability tailwinds. It said digital payments continue to see robust growth, adding that there is significant headroom for an increase in penetration of lending products into existing consumers
Analysts at Citi expect adjusted Ebitda/Ebit margins to expand from 5%/minus 3% in 4QFY23 to 13%/9% by FY26E on top line growth at 20% CAGR over FY23-26E. "The CMP implies 22 times FY26E EV/adjusted Ebitda," it said while raising its price target on the stock to Rs 1,144 from Rs 1,103 per share
As per Macquarie, few months of bad performance could result in lenders withdrawing their credit lines, significantly affecting Paytm's ability to grow. There are risks related to competition as well as regulatory issues as Paytm frequently seems to be facing regulatory ire for lapses on its part, it said
"We also believe a lot more needs to be done on corporate governance by getting an independent non-executive Chairman, more independent members on the board etc. Stock trades at 4.2 times FY24E sales," Macquarie said while suggesting a target of Rs 800.88 on the new-age company stock
Paytm reported a 51% jump in revenue from operations at Rs 2,334 crore in Q4FY23 on an annual basis. The company brought down its net loss in the March quarter to Rs 168 crore from Rs 761 crore a year ago, and Rs 392 crore in Q3FY23. The company said its revenue growth was led by an increase in gross merchandise value, higher merchant subscription revenues, and growth of loans distributed through the company’s platform
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