The stock rose 1.5% intraday on Monday to a high of Rs 857.50.
Paytm’s consolidated net loss narrowed to Rs 357 crore for the quarter ended June. It was Rs 644 crore in the year-ago period. However, the loss has widened when compared with Rs 168 crore reported in the preceding March quarter. Revenue from operations during the quarter rose 39% to Rs 2,342 crore as against Rs 1,680 crore clocked in the previous year quarter. The contribution profit for the first quarter is up by about 80% YoY to Rs 1,304 crore, with a margin of 56%.
5 reasons why CLSA remains bullish on Paytm:
1) Gross Merchandising Value (GMV) growth remains in line.
2) The fintech platform has been scaling up in lending while ticket sizes see a rise. The net take rate in lending further dipped 30 bps to 3.5%. This was largely driven by higher rental income from sound boxes. “We estimate 17% QoQ and lower payment processing costs. The latter was driven by a higher share of UPI transactions, negotiating better transaction rates with banks & some benefits from buy now pay later (BNPL).
3) The brokerage has put the EBITDA estimates at 9%-12%. It has used a long-term discounted earnings model to arrive at the target price and factored in a risk-free rate of 7%, beta of 1.25X and risk-premium of 5.5%. Our terminal growth rate assumption is 5%.
4) CLSA said that Paytm’s growth in business metrics remains healthy though the fixed costs continue rising.5) Asset quality is improving. The company is expanding its headcount for growth, leading to a higher-than-expected Opex while fixed costs rose 14% QoQ/26% YoY.
Meanwhile, JM Financial also came out with a ‘Buy’ recommendation on the stock.
JM Financial has maintained a ‘Buy’ rating with a revised target price of Rs 1,060, valuing Paytm at FY30E EV/EBITDA discounted back to FY25.
“Paytm reported strong 1QFY24 results with its adjusted EBITDA improving to Rs 830 million (+60% QoQ with base adjusted for UPI incentive). Payment services vertical continued its stellar run with net payments yields improving to 16bps (+2bps QoQ) on the back of an increase in GMV of non-UPI instruments like EMI and cards and lower interchange cost for wallet, post interoperability circular by NPCI,” the brokerage said.
We maintain our 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, it added.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)
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