Paytm - Raising Gross Merchandise Value, Disbursement Projections By 4-21%: Motilal Oswal

Motilal Oswal Report

We believe that constant improvement in contribution margin and operating leverage will continue to drive One 97 Communications Ltd.’s operating profitability.

We believe that after reporting adjusted Ebitda breakeven, almost a year ahead of its guidance, Paytm is on track to report Ebitda breakeven in H2 FY25.

We raise our FY25E gross merchandise value and disbursement estimates by 5% and 21%, respectively, and estimate the mix of financial revenue to increase to 32% by FY25E from 19% in FY23. We thus estimate revenue/contribution profit to register a compound annual growth rate of 31%/36% over FY23-28, while Adjusted Ebitda/Ebitda margin improves to 13%/5.9%, respectively, by FY25.

We revise our target price to Rs 1,050 based on 16 times FY28E enterprise value/Ebitda and discount the same to FY25E, with a discount rate of ~15%.

Our fair value corresponds to 4.7 times FY25E price/sales. We thus reiterate our ' Buy' rating on the stock.

Ability to maintain strong portfolio quality amid rapid disbursement growth, supply overhang from some of the large shareholders, and evolving regulatory environment adversely affecting Fintechs remain the key risks to our call.

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