Shares of Paytm (listed as One97 Communications) rose after financial services firm Citi, JP Morgan reinstated a buy rating despite a more than 60 per cent fall in the stock from Paytm’s IPO price. The large-cap stock is trading higher than 20-day and 50-day moving averages but lower than 5-day, 100-day and 200-day moving averages.
Citi has resumed its coverage on the new-age fintech player with a ‘buy’ call and a target price of Rs 915. Earlier it had a target price of 910 on the counter. “Paytm is showing steady improvement in payment monetization,” said Citi. “It is also scaling up the financial services rapidly.” The firm is scaling up financial services rapidly, it said. Paytm stock has been a huge underperformer since listing last year. So far this year, shares of Paytm have tanked more than 53 per cent to now trade at Rs 624.50 per share.
“We are resuming coverage of One 97 Communications (Paytm) following a brief period of internal restriction, and after the company’s 4QFY22 results,” Citi said in a report. They added that Paytm is showing steady improvement in payments monetization and scaling up financial services rapidly (focus on retention & upselling/partnerships). “We expect growth in fixed opex to meaningfully slow over FY23-24E; driving an Adjusted EBITDA breakeven by FY25E. At 6x FY24E EV/GP, valuations are relatively reasonable against peers.”
Analysts said that Paytm reported decent January-March quarter results. The brokerage firm highlighted three segments from the same. First was the strong payment gross margins at 10bps. Payment gross margins are steadily improving on account of improvement in overall monetization with payment revenues up 80 per cent on-year basis. Further, analysts added that the financial services arm of Paytm continues to scale rapidly, with a strong focus on upselling. The post-paid acceptance network is at over 9 million; the customer base is above 4 million.
Earlier this week, JP Morgan had remained bullish on Paytm, maintaining its ‘overweight’ rating. The global brokerage firm had trimmed its target price to Rs 1,000 from Rs 1,200 earlier.
JP Morgan has backed Paytm’s path to profitability, citing the reduction in adjusted EBITDA loss with better cost controls are the key stock drivers. It noted that improved profit markets set the stage for operating leverage from the second quarter.
The stock was listed at Rs 1,950 on November 18, 2021, a 9.30 per cent discount to the issue price, marking the debut of the country’s biggest initial public offering (IPO) at that time. The share opened at Rs 1,950 on NSE. The IPO was open for subscription from November 8 to November 10. The price band of the IPO was fixed at Rs 2,080-Rs 2,150 per share. The share made its debut at Rs 1,955 on BSE.
Meanwhile, the Vijay Shekhar Sharma-led firm reported a loss of Rs 763 crore for the quarter ended March 31, 2022 against a loss of Rs 778.5 crore in the December quarter and Rs 444 crore in the year-ago period.
However, revenue from operations zoomed 89 per cent year-on-year (YoY) to Rs 1,540.9 crore in Q4 as compared with Rs 815.3 crore in the corresponding quarter last year.