Paytm Q1 Results Review: Motilal Oswal Stays 'Neutral', Revises Target Price
Motilal Oswal maintains its profit estimates and project Paytm to turn Ebitda positive by FY26.
Paytm reported a net profit of Rs 1.2 billion in Q1 FY26 (vs our estimate of Rs 24 million), aided by lower costs related to DLG, collections and ESOP. Gross merchandise value increased by a healthy 6% QoQ (up 27% YoY) to Rs 5.4 trillion.
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Motilal Oswal Report
One 97 Communications Ltd. reported a steady quarter with in-line revenue, while tighter cost control led to a healthy profit for the company. Disbursement commentary was steady, while monthly transacting user witnessed a steady-state recovery. Gross merchandise value recovery too was better than expected.
Paytm is making steady progress toward profitability, underpinned by its strategic shift toward financial services and disciplined cost management.
Contribution margin expanded to 60.1% thanks to cost control. Disbursement growth is expected to remain healthy going ahead given improving tailwinds in unsecured lending. We estimate a 35% CAGR in disbursements over FY25-28, with healthy take rates expected.
Paytm’s Rs 161 billion cash cushion offers comfort; consistent delivery is critical for sustainable shareholder returns.
We maintain our contribution profit estimates and project Paytm to turn Ebitda positive by FY26. We value Paytm at Rs 1,025 based on 21x FY27E Ebitda, which corresponds to 6.8x FY27E sales.
We reiterate our Neutral rating on the stock.
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