Paytm share price continues upward trend after hitting lifetime low 438.35 on NSE at Rs. In the last one month, One 97 Communications share price has gained up to 18 percent in the last one month, while in YTD time, this fintech stock has gained 24 percent. However, Motilal Oswal still believes that paytm share price It may continue to increase further to more than 30 per cent in the long term. Brokerage predicts that Paytm share price may go up 865 per share level in the long term.
But Why is Motilal Oswal Bullish on Paytm Shares?The brokerage said, “The digital payments industry is projected to double to USD16t by 2026, within which the mix of digital payments is expected to grow by 65%. Thus, digital payments are expected to grow ~3x from USD3t to USD10t by 2026 2021. Mobile payments are projected to grow even faster, from ~5x to USD3t by 2026. Furthermore, growth in QR deployment will drive merchant payments, which are expected to grow ~6x to USD2.7t by 2026. Thus Paytm will be a big beneficiary of this growth as it has a strong position in both the digital payments and lending businesses.”
On strong Paytm share fundamentals, which may continue to propel share prices, Motilal Oswal said, “Paytm has reported a healthy traction in growing its GMV at 55% CAGR in FY19-23. While the COVID- Growth was a bit soft due to covid 19, picked up uniformly post covid. GMV registered 81% CAGR in FY 21-23. With increasing use cases, we expect GMV to pick up in FY 23-25 Will report a healthy 27% CAGR in Q1. While the number of subscription paid devices grew to 6.8m. As penetration among merchants remains low, we expect to maintain traction with quarterly additions of ~1.0m devices. We anticipate payments revenue thus clocking a healthy 21% CAGR over FY23-25.”
on the financial a 97 communication Ltd., the brokerage said, “Paytm’s financial business drives the profitability of the core payments business due to its inherently high contribution margin. In the financial business, Paytm primarily offers three types of loans, namely: a) Paytm Postpaid – Provides short-term term credit up to INR60k with a tenure of up to 30 days; b) personal loan – Offers loans with an average tenure of ~15 months and an average ticket size of INR0.12m; and c) Merchant Loans – offers loans with an average tenure of ~12 months and an average ticket size of INR0.15m. Paytm does not bear any underwriting risk and co-originates loans with other financial partners, on which it earns sourcing and collection fees. The financial services revenue mix has increased to 19% in 9MFY23 from just 4% in FY19. With rapid growth in GMV, merchant acquisition and cross-sell rate, we anticipate Paytm to register 58% CAGR in its financial revenues in FY 23-25.
Giving a ‘Buy’ tag to Paytm shares, Motilal Oswal said, “Paytm has achieved a breakeven in adjusted EBITDA during 3QFY23, which is well ahead of its guidance. We believe that contribution margin and operating leverage will improve.” Continual improvements will continue to drive its operating profitability.” Thus we estimate Paytm to achieve EBITDA break-even by FY25 with an EBITDA margin of 3.2%. We forecast 26%/32% CAGR growth in its revenue/contribution profit in FY23-28,” adding, “We thus value Paytm based on 18x FY28E EV/EBITDA and ~15% Taking a discount rate of 1.5%, it gives the same discount as FY25E, thus valuing the stock at INR865, which implies 4.5x FY25E P/Sales. We initiate coverage on the stock with Buy rating.
Disclaimer: The views and recommendations given above are those of individual analysts or broking companies and not of Mint. We advise investors to do due diligence with certified experts before making any investment decision.
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