One97 Communications Ltd., the parent of Paytm, has received fresh target price upgrades from global brokerages Goldman Sachs and Citi after delivering a stronger-than-expected June-quarter performance, with both firms citing improving profitability, accelerating payments growth and expanding financial services as key growth drivers.
Paytm reported a consolidated net profit of Rs 220 crore for the June quarter, ahead of Bloomberg's estimate of Rs 188 crore. Revenue rose to Rs 2,448 crore, beating the consensus estimate of Rs 2,375 crore, while EBITDA came in at Rs 203 crore, well above the expected Rs 178 crore. EBITDA margin stood at 8%, compared with Street expectations of 7.88%.
Sequentially, net profit increased 20% from Rs 184 crore, revenue rose 8% from Rs 2,264 crore, while EBITDA surged 54% from Rs 132 crore, lifting the margin to 8% from 6% in the previous quarter. The company also reported its highest-ever quarterly EBITDA, driven by faster merchant GMV growth and strong momentum in its payments and financial services businesses.
Paytm Q1 Results - Cons, QoQ
- Net profit up 20% at Rs 220 crore vs Rs 184 crore
- Revenue up 8% at Rs 2,448 crore vs Rs 2,264 crore
- EBITDA up 54% at Rs 203 crore vs Rs 132 crore
- EBITDA margin at 8% vs 6%
Following the earnings, Goldman Sachs maintained its 'Buy' rating and raised its target price to Rs 1,500 from Rs 1,430. The brokerage said the strong quarter warranted earnings upgrades, with growth being driven by market share gains across both offline and online payments. It also highlighted sustained traction in merchant loan distribution and said Paytm's application for a wallet licence could create an additional revenue stream.
Citi also reiterated its 'Buy' rating and increased its target price to Rs 1,560 from Rs 1,425. The brokerage said EBITDA momentum was supported by robust financial services growth and lower cloud infrastructure costs. It noted that payment GMV growth accelerated during the quarter, with both merchant and consumer businesses contributing to faster growth and stronger operating leverage.
Brokerage Views
CLSA
- Maintain Underperform; Hike target price to Rs 1,050 from Rs 1,000.
- GMV growth is accelerating, albeit at a slightly lower take rate.
- Financial services revenue growth remains strong, while contribution margins are steady.
- While growth has picked up, CLSA remains cautious about its sustainability.
- The recent rally in the stock, driven by expectations of the return of UPI MDR, leaves little upside even if the proposal materialises.
Goldman Sachs
- Maintain Buy; Hike target price to Rs 1,500 from Rs 1,430.
- Q1FY27 was a strong quarter, prompting estimate upgrades.
- Growth was driven by market share gains across both offline and online payments.
- Strong traction in merchant loan distribution continued.
- Paytm has applied for a wallet licence, which could become an additional revenue driver.
- Expects Paytm's EBITDA margin to double from Q1 levels by FY28.
Citi
- Maintain Buy; Hike target price to Rs 1,560 from Rs 1,425.
- EBITDA momentum was driven by financial services growth and lower cloud costs.
- Payment GMV growth accelerated during the quarter.
- Growth is being led by both merchant and consumer businesses, while operating leverage continues to improve.
- Sees further upside to earnings, both in quantum and quality, if UPI MDR is introduced.
ALSO READ: Paytm Q1 Results: Profit Clocked For 5th Straight Quarter, Revenue Nears Rs 2,500 Crore
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