Share price of One 97 Communications (Paytm) jumped over 5 per cent in morning trade on BSE on May 8, outperforming March quarter estimates.
Paytm’s consolidated net loss narrows sharply 168.4 crore in the fourth quarter of FY23 (Q4FY23), as compared to a loss of Rs. 761.4 crore in the fourth quarter of the previous year. The performance was aided by higher GMV (gross merchandise value), higher merchant subscription revenue, growth in loans disbursed and full year UPI promotion during the quarter.
GMV, which stood 3.62 lakh crore for Q4 FY23, a year-on-year (YoY) growth of 40 per cent was seen.
Paytm’s revenue from operations 2,334.5 crore in Q4FY23, registering a growth of 51.5 per cent 1,540.9 crore in Q4FY22 and up 13.2 per cent 2,062.2 crores.
Brokerages Are Upbeat
Most brokerage firms seem bullish on Paytm’s prospects. While they find the company’s Q4FY23 numbers impressive, they highlight that the company is well poised to scale new heights going forward.
Global financial firm Citi has put a buy call on the stock and raised the target price to Rs. from 1,144 1,103, 66 percent upside.
“Paytm reported stellar Q4 numbers, well ahead of Citi and consensus estimates on adjusted EBITDA. 230 cr (city/consensus: 90 crores/ 110 crores) and adjusted. on EBIT 74.4 Crore (City:- 62 crores),” Citi said.
City hopes PaytmThe company’s adjusted EBITDA/EBIT margin will grow from 5 per cent/-3 per cent in Q4FY23 to 13 per cent/9 per cent by FY26E on topline growth at 20 per cent CAGR over FY2023-26.
“We feel that Paytm has a number of existing and emerging levers to drive long-term platform stickiness (BNPL, devices etc.) and improve overall profitability in the business. Paytm’s key edge lies in its presence on both sides of the payments ecosystem It has first-mover advantage (90mn MTUs and 7mn merchant devices) which gives it a solid customer acquisition engine for new services – commerce, financial or payments,” Citi said.
“The stock has fallen materially from its IPO price 2,150 per share, partly linked to fintech sector de-rating year-to-date, concerns over profitability in core payments business (overstated in our view) and regulatory headwinds in India (moderate risk in our view). At current market prices, we think valuations are attractive and pricing in most of the downside risk,” Citi said.
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Brokerage firm Motilal Oswal Financial Services has a buy recommendation on the stock with a target price of 900 as it said Paytm reported a healthy quarter, with total revenue supported by healthy growth in GMV and disbursements while momentum remained strong in addition to subscription tools.
“We revise our estimates and expect Paytm to report PAT 210 cr by FY25 vs earlier estimate 120 crores. We forecast adjusted EBITDA margin and EBITDA margin of 11.7 per cent and 3.8 per cent, respectively, and contribution margin of around 57 per cent by FY25, Motilal Oswal said.
Motilal Oswal believes that continued improvement in contribution margin and operating leverage will continue to drive Paytm’s operating profit growth.
“We estimate Paytm to achieve EBITDA leverage by FY25 and a discount similar to FY25E, while valuing Paytm on a basis of 18 times FY28E EV/EBITDA and taking a discount rate of around 15 per cent. We value the stock . 900, which implies FY25E P/Sales (price-to-sales ratio) of 4.5 times,” said Motilal Oswal.
Disclaimer: The views and recommendations expressed in this article are those of the brokerage firms. These reports are available in public forums. These do not represent the views of Mint. We advise investors to do due diligence with certified experts before making any investment decision.
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