Paytm share price gains as Q1 net loss narrows; brokerages raise target

Paytm share price gained over a percent on Monday after the fintech major reported its earnings for the quarter ended June 2024. The stock rose as much as to ₹apiece on the BSE.

One 97 Communications, the parent company of Paytm, narrowed its consolidated net loss to ₹357 crore in the April-June 2024 period from ₹644 crore in the corresponding period last year. 

However, the company’s net loss has widened when compared to a loss of ₹168 crore reported in the March quarter.

Paytm’s revenue from operations during Q1FY24 rose 39.4% to ₹2,341 crore from ₹1,679 crore in the year-ago period.

Paytm's credit distribution business jumped 167% YoY, disbursing ₹14,845 crore in loan value. The overall number of loans facilitated on the payments platform registered a 51% increase at 1.28 crore, according to a regulatory filing by One97 Communications.

Read here: Paytm Q1 Results: Fintech giant's net loss narrows to ₹357 crore, revenue up 39%; check details

Most brokerages raised the target price on Paytm stock after the healthy growth in business metrics. Here’s what brokerages said:

CLSA

Paytm’s Q1 Ebitda ex-ESOP was marginally higher than CLSA’s estimate, with in-line revenue but lower processing costs. Core business metrics were strong with GMV growth of 37% YoY and lending disbursements up 18% QoQ.

“Fixed costs, ex-ESOP, were up 14% QoQ as the company continues to increase manpower. We understand the need to capture growth opportunities, but we struggle to understand what the company will do with so many employees in five years,” CLSA said.

The global brokerage increased its FY25-26CL core Ebitda estimates 9%-12% to factor in healthy business growth and higher net take rates. It expects Paytm to generate free cash flow over the next few quarters. 

It maintained a ‘Buy’ rating on the stock and raised the target price to ₹1,050 per share from ₹850 earlier.

Also Read: Reliance Q1 Results: Share price falls 2%; here's what top domestic and global brokerages say

Citi

Citi noted that Paytm’s net payment margin was on an upswing and ahead of estimates aided by lower interchange expenses. 

According to Citi, the margin upswing resulted in a continued expansion in adjusted EBITDA. However, EBITDA expansion was partly offset by higher fixed cost overheads.

Citi has a ‘Buy’ rating on the stock and raised the target price to ₹1,200 per share.

JM Financial

JM Financial expects 38% revenue CAGR over FY23-25E for Paytm, with contribution margins sustaining at 50%+ incrementally. 

It maintained its positive stance on the stock and now see Paytm’s cash burn having sustainably reduced given strong ecosystem benefits and continued momentum in loan distribution business along with better performance metrics. 

The brokerage maintained a ‘Buy’ rating and raised the target price to ₹1,060 per share (valuing it at FY30e EV/EBITDA discounted back to FY25) from ₹855 earlier.

Also Read: Kotak Mahindra Bank share price falls over 3% after Q1 result; Should you buy, hold or sell the stock?

Motilal Oswal Financial Services

Paytm reported a largely in-line 1QFY24 with sustained momentum in GMV and robust growth in disbursements. This, coupled with strong traction in subscription devices, led to healthy growth in total revenue. Gradual improvements in operating leverage boosted contribution margin to 56%.

Motilal Oswal Financial Services said that Paytm’s adjusted EBITDA was below its estimate, but the company remains on track to achieve EBITDA breakeven by FY25.

“We believe that consistent improvement in contribution margin and operating leverage will continue to drive operating profitability. We value Paytm based on 17x FY28E EV/EBITDA and discount the same to FY25E taking a discount rate of ~15%,” the domestic brokerage house said. 

It has a ‘Buy’ call on the stock and a target price of ₹1,000 per share, which implies 4.7x FY25E P/Sales.

At 10:40 am, Paytm share price was trading 0.36% higher at ₹846.60 apeice on the BSE. 

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