Paytm Q4 Results Review - Lower Than Expected Disruption; Recovery From Q2 FY25 Onwards: Dolat Capital

Dolat Capital Report

One 97 Communications Ltd. (Paytm) reported revenue decline of 20.5% QoQ (our estimate: -29%) with monthly transacting user/average revenue per user decline of 4/17% QoQ, primarily due to business disruption (Paytm Payments Bank Ltd. impact) and buy-now-pay-pater calibration.

Consumer payments and loan distribution declined 16%/50% QoQ, while merchant payments Biz grew 3% QoQ.

Adjusted Ebitda stood at Rs 1.03 billion (estimate: Rs 0.5 billion) aided by UPI incentive and lower Opex. For Q1, the company expects revenue of ~Rs 15-16 billion (implies ~20% cut) and adjusted Ebitda loss between Rs. 5-6 billion, with sharp recovery Q2 onwards.

Paytm’s renewed focus on business growth and cost efficiency signals the right direction to revival. We have cut our FY25/FY26E revenue estimates by 8%/7% and expect profitability goals to further defer.

However, we believe current market price does not factor a potential sharper recovery Q2 onwards and thus we maintain ‘Buy’ rating with DCF based target price of Rs 650 (implies 2.4 times on FY26E enterprise value/sales).

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