Paytm shares hit 20% upper circuit. Here’s why

The payment gateway services provider reported a consolidated net loss of Rs 392 crore for the quarter ended December 2022. The net loss has narrowed from Rs 779 crore a year ago.

The reported operating profit improved by Rs 424 crore from the year-ago period, and the margin improved to 2% of revenue from -27% a year ago, due to sustained improvement in contribution profit and strong operating leverage.

Paytm parent’s consolidated revenue from operations increased by 42% year-on-year (YoY) to 2,062 crore, driven by an increase in merchant subscription revenues, growth in loan distribution and momentum in the commerce business.

Its merchant subscriptions stood at 5.8 million compared to 3.8 million a year ago. The number of merchants paying subscriptions increased by 1 million sequentially.

Also Read | Worst seems to be getting over for Paytm: Deven Choksey

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At 11 am, the scrip was trading 9.3% higher at Rs 610 over its last day’s closing price of Rs 558. However, in the last one year, the stock has fallen about 36%.Here’s what brokerages say about Paytm:

Goldman Sachs
Goldman Sachs reiterated its Buy rating with a revised target price on Paytm at Rs 1,150 (earlier: Rs 1,120), implying an upside potential of 109% from the current market price.

“On the back of 3QFY23 results, we lower our FY23E-25E revenue estimates by up to 3%, due to continued mix shift towards UPI and weaker than expected cloud revenues. However, our EBITDA estimates see a sharp increase on better than expected cost control. We reiterate our Buy rating and believe Paytm’s current share price continue to offer a compelling entry point into India’s largest and one of the most profitable fintech platforms,” it said.

Citi
Citi has a Buy call on Paytm with a target price of Rs 1,061, indicating an upside potential of 93% from the current market price.

“Paytm continues to leverage well its payments platform to drive lending distribution (+36% QoQ), with significant headroom for growth ahead, in our view. With fixed costs reined in, margins can comfortably continue to expand (expect 2%/8% in FY24/25E vs -5%/2% in FY23/3Q),” it said.

BofA Securities
Bofa maintained its Neutral rating on Paytm with a target price of Rs 730, which shows an upside potential of 33% from the current market price.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)