One 97 Communications Ltd. surged as much as 20%, the most since its listing, after analysts said Paytm's parent is likely to break even in fiscal 2025.
Paytm's loss narrowed to Rs 392.1 crore for the October-December quarter, compared with Rs 571.5 crore in the preceding quarter. Analysts estimated a net loss of Rs 529.4 crore, according to Bloomberg.
The stock surge also came after the Economic Times reported on Monday that the government had blocked numerous lending apps, including Naspers Ltd.'s PayU and other services linked to China.
One 97 Communications (Paytm) Q3 (Consolidated, QoQ)
Revenue was up 8% at Rs 2,062 crore (Bloomberg estimate: Rs 2,120.43 crore).
Ebitda loss fell 38% to Rs 330.70 crore (Bloomberg estimate: Rs 493.75 crore loss).
Net loss contracted to Rs 392.1 crore (Bloomberg estimate: Rs 529.35 loss).
Dolat Capital in its Feb. 7 investor note retained Paytm's growth estimates for fiscal 2022 through 2025, citing the company's "healthy growth performance" in the third quarter and "strong leading indicators" across businesses such as loans, device subscriptions, and monthly transacting users.
The brokerage expects operating margins to improve by 250–300 basis points in FY25. These estimates imply that the company would break even in terms of EBIT and profit after tax by the second half of FY25, it said.
JM Financial raised Ebitda estimates for the company, given a scale-up in financial services and expects a normalised Ebitda breakeven for Paytm in FY25, according to its Feb. 6 note.
The stock surged as much as 20% intraday, the most since its listing.
It closed the day with 5.43% gains at Rs 588.6, compared with a 0.24% decline in the benchmark Nifty 50. The total traded quantity in the day stood at 4.5 times the 30-day average.
The relative strength index was 61.7.
Out of the 12 analysts tracking the stock, eight maintained a 'buy' rating, three suggested 'hold,' and only one recommended 'sell,' according to data compiled by Bloomberg. The return potential of the stock is 51.1% over the next 12 months.
Here's what analysts have to say:
JM Financial
Maintains 'buy' and raises the target price to Rs 750 from Rs 600, implying a potential upside of 34.3%.
Expects a normalised Ebitda breakeven in fiscal 2025.
Expects 42% revenue CAGR over FY22-FY25, with contributing margins sustaining at over 50% incrementally.
Operating metrics are gradually improving, and management's focus on increasing efficiencies and profitability should help Paytm turn profitable in fiscal 2026.
Dolat Capital
Maintains a 'buy' rating on the stock with a target price of Rs 1,250, implying a potential upside of 138%.
Retains growth estimates for FY22-FY25 given healthy growth performance and strong leading indicators across businesses.
Expect operating margins to improve by 250–300 basis points for FY23–FY25.
These estimates imply that company would achieve EBIT and profit after tax breakeven by the second half of FY25.
Expects 14% sequential growth in revenues in January-March, driven by traction across verticals and a one-time gain of about Rs 1.7 billion from the UPI incentive.
Expects EBIT margin to improve by 694 basis points sequentially in Q4 aided by operating leverage and large incremental revenue from UPI incentive.
Expects company to achieve positive, free cash flow by the first half of fiscal 2024.
Yes Securities
Maintains a 'neutral' call on the stock and revises the target price to Rs 600, implying a potential upside of 7%.
The loan distribution business serves to enhance both revenue and margin.
The share of financial services in overall revenue continues to rise, even though there were some negative one-offs for the quarter.
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