September 24, 2024
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One97 Communications Stock Research Report by Emkay Securities
Analysis dated 24 September 2024
Sector: BFCI
Price on Analysis date: Rs. 641,
Target Rs. 750
(17% upside potential)
Target Period: 12 Months
We upgrade Paytm to ADD, while elevating our DCF-based TP to Rs750/share (earlier Rs375), implying 3.6x/3x FY26E/27E EV/Operating revenue, as the easing regulatory stance should pave the way for approvals from NPCI/RBI to onboard new users/online merchants soon and, thus, drive business turnaround. This, coupled with strong cost optimization measures, should put Paytm on an early path to profitability. Management expects the loan distribution business to gradually re-accelerate, led by merchant loans with relatively better take rate/asset quality to do the heavy lifting in the near-to-medium term before PL and other products in the beta stage pick up pace. Paytm’s broking and insurance distribution business is gaining scale and has already turned profitable. It has sold its operationally heavy entertainment business in 2Q, which should boost cash buffers as well as reduce net loss in FY25E; it remains open to offload any other non-core business. Factoring in the higher cost optimization, we expect Paytm to again turn operating EBITDA (ex-ESOP and UPI incentive) positive by 4QFY25E, when gradual busines
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