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Dolat Capital Report
One 97 Communications Ltd. reported revenue growth 7.6% QoQ (in-line with estimate), led monthly transacting user/average revenue per user growth of 3.3/4.2% sequentially.
Merchant business and finance services grew equitably at 9.4% QoQ, where merchant business saw strong device addition (+1.3 million devices QoQ), while financial services saw strong traction in merchant loans (value of loan up 19% QoQ covering up for conscious pause taken in personal loan distribution).
Paytm's adjusted Ebitda improved to Rs 1,536 million (last quarter: Rs 840 million), with revenue growth, contribution margin (+93 bps), and mild increase in indirect costs (+4% QoQ).
Continued strength in merchant business, calibrated lending growth and and improving contribution margins reiterates our positive stance.
Maintain 'Buy' with target price of Rs 1,400, (implies 4.3 times on FY26E enterprise value/sales).
What to expect next quarter
We expect a strong revenue growth in Q3, led by festive season, and expect 10.6% QoQ growth. We expect Ebit margin loss to lower by 495 bps QoQ led by continued improvement in contribution margin, and direct and indirect costs balanced between capturing festive season growth and improving profitability.
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