Analysts enthused over Paytm’s Q1 performance, raise target price up to ₹1,200

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Many analysts have turned bullish Paytm’s The stock posted its first-quarter results announcement on Friday, which raised its price target to $1,200 per share.

Among those who raised the price target were analysts at Morgan Stanley, Goldman Sachs, Citi, YES Securities, JM Financial and CLSA. Most have suggested a “Buy” rating on the stock except for Morgan Stanley with an “Equalweight” rating.

Paytm on Friday reported a standalone net loss of Rs 358 crore, narrower than the net loss of Rs. 645 crore in the same financial quarter last year. However, the latest net loss was wider than the net loss of Rs 168 crore in the March 2023 quarter.

For the quarter under review, EBITDA before ESOP costs grew to ₹84 crore as compared to ₹52 crore in Q4FY23 (excluding UPI incentives). Paytm revenue jumped 39 percent year-on-year to INR 2,342 crore.

Paytm’s contribution profit in the first quarter of this financial year was ₹1,304 crore, an increase of 80 percent year-on-year while contribution margin improved to 56 percent from 43 percent last year, driven by an increase in net payment margin and loan distribution revenue.

Also read: Paytm loan payments grew 167% in the first quarter

However, Paytm stock closed at ₹802 on the NSE on Monday, down just over 5 percent from the previous day’s close of ₹844.

Meanwhile, Foreign Portfolio Investors (FPIs) have increased their stakes to 11.6 percent to 16.9 percent in Paytm as of the end of June 2023, according to the shareholding pattern the company has offered on exchanges.

What the analysts say

Morgan Stanley raised its price target on Paytm by 11 per cent to 830 rupees apiece on higher EBITDA margin estimates, while maintaining an “equal” rating on the stock.

Analysts at Morgan Stanley added that gross merchandise value (GMV) growth continues to be driven by healthy monthly transaction user (MTU) growth, an expanding merchant base of record, and increased device penetration.

Also read: Shriram Finance and Paytm announce ‘strategic alliance’

Analysts at Citi raised their price target to $1,200 with a “buy” rating on the stock. It says net payment margin is rising and ahead of estimates supported by lower interchange expenses.

Similarly, Goldman Sachs increased the company’s share price target to $1,200 as analysts see Paytm as not only the fastest growing company in India, but also the most profitable. The growth trajectory of payment devices impresses analysts as FY25 is expected to be the first full year of positive net income

CLSA raised the 12-month price target to $1,050 with a “Buy” rating on the stock. BofA expects the share price to rise nearly 21 percent to INR 1020 as it sees Paytm’s growth trajectory as sound. It maintains a “buy” rating on the company’s share price.

Also read: Paytm brings UPI SDK in India for faster payments

Moreover, analysts at Motilal Oswal Financial Services We see a potential 19 percent rise in Paytm share price to INR 1,000 apiece. The brokerage maintained a “buy” because it still believes Paytm will break even in FY25. Management reiterated that the fintech pioneer remains focused on turning free cash flow positive before the end of FY24. “Paytm reported Q1 FY24 largely in line with continued momentum in GMV and strong payments growth. We believe continued improvement in contribution margin and operating leverage will continue to drive operating profitability.”

YES Securities upgraded Paytm’s rating to ‘Add’ from ‘Neutral’ previously, and revised its price target upward to INR950 per lot.

Paytm management directed that the company would achieve 7-9 bps net payments margin including the UPI incentive but achieved the same without the UPI incentive. It said the improvement in payments net margin was driven, among other factors, by the attraction of higher margin payment products such as EMI and card transactions.

GM Finance He also upgraded the price target to ₹1,060 from ₹855 while maintaining a “buy” rating on the company’s stock.