Paytm shares rise 4% ahead of Q4FY23 results; here's what brokerages expect

Shares of One97 Communications -- parent firm of Paytm -- surged 4 per cent to Rs 697.5 apiece on the BSE in Friday's intra-day trade, ahead of the company's March quarter result for FY23 (Q4FY23). At 10:30 AM, the shares were up 3.5 per cent as against 0.34 per cent dip in the benchmark S&P BSE Sensex.

So far in the current calendar year, shares of the fintech company has zoomed 26 per cent as against 1.5 per cent gain in the benchmark S&P BSE Sensex.

Goldman Sachs expects Paytm to report revenue growth of 49 per cent on a year-on-year basis, while adjusted Ebitda margin at 10 per cent. 

 

Back home, domestic brokerage firm YES Securities expects overall revenue from operations to grow at 17.8 per cent quarter-on-quarter (QoQ) to Rs 2,430 crore. The brokerage has upgrade the target price on the stock to Rs 700 vs Rs 600 earlier. 

During its Q4FY23 business update, Paytm had said that its Gross Merchandise Value (GMV) grew 40 per cent during the quarter as compared to the same quarter last year. From Rs 2.59 trillion in Q4FY22, the GMV stood at Rs 3.62 trillion at the end of Q4FY23.

While the value of total loans disbursed jumped 253 per cent from Rs 3,553 crore in Q4FY22 to Rs 12,554 crore in Q4FY23, the number of loans rose 82 per cent during the same period from 6.5 million to 11.9 million. 

"We continue to strengthen our leadership in offline payments, with 6.8 million merchants now paying subscription for payment devices, an increase of 1 million in the quarter ended March 2023. With our subscription as a service model, the strong adoption of devices drives subscription revenues and higher payment volumes, while increasing the funnel for our merchant loan distribution," Paytm said. 

Given the growth, brokerage firm Motilal Oswal Financial Services initiated coverage on Paytm, last month, with a 'Buy' rating and a target price of Rs 865.

"Paytm has reported a healthy traction in growing its GMV at 55 per cent CAGR over FY19-23. While the growth was slightly softer due to Covid-19, the same picked-up strongly post-Covid. GMV clocked 81 per cent CAGR over FY21-23. With increasing use cases, we expect GMV to report a healthy 27 per cent CAGR over FY23-25," it said in its report. 

Paytm, it added, also posted steady growth in monthly transacting user (MTUs) to ~90 million as of FY23 while the number of subscription payment devices rose to 6.8 million. As the penetration among merchants remains low, we expect the traction to sustain with a quarterly addition of 1.0 million devices. We forecast the payment revenue to thus clock a healthy 21 per cent CAGR over FY23-25.

As the company achieved adjusted Ebitda breakeven in Q3FY23, wel ahead of its guidance, Motilal Oswal expects a constant improvement in contribution margin and operating leverage will continue to drive its operating profitability.

"We thus estimate Paytm to achieve Ebitda break-even by FY25 with an Ebitda margin of 3.2 per cent. We further estimate its revenue/contribution profit to grow at 26 per cent/32 per cent CAGR over FY23-28. We thus value Paytm based on 18x FY28E EV/EBITDA and

discount the same to FY25E taking a discount rate of ~15 per cent, and thus valuing the stock at Rs 865, which implies 4.5x FY25E P/Sales," it said.

One 97 Communications Ltd (Paytm) is India’s leading payments app and FinTech enterprise offering payments, financial services, commerce, and cloud services to its large consumer/merchant base of 350 million/31.4 million, respectively as on Q3FY23. It is among the largest payments platform, with GMV expected around Rs 13.2 trillion for FY23 (Rs 8.5 trillion in FY22).