Paytm: YES Securities said the commentary calls into question the thesis that Paytm was fast transforming from a Payments-focused company to a loan distribution-focused company.
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One 97 Communications Ltd (Paytm) saw its shares recovering some lost ground, as the session progressed on Thursday, yet the scrip stayed the worst performer in the BSE500 pack. A few brokerages reduced target prices on the stock as Paytm in an analyst meet said it would be scaling down its monthly disbursements in its small-ticket ‘postpaid’, driven by a conscious call and in consultation with its lending partners.
Shivaji Thapliyal, Head of Research and Lead Analyst, Yes Securities said while Paytm has flagged that the impact on profitability would be lower given that postpaid is a business of lower profitability. The commentary, he said , calls into question the broad thesis that Paytm was fast transforming from a Payments-focused company to a loan distribution-focused company.
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“The key question to ask is what proportion of its overall customer base would Paytm be ultimately be able to convert into loan customers in the long-run,” he said.
Thapliyal said his brokerage had a Sell on Paytm at the time of its IPO and that the broking firm still has less-than-bullish ‘ADD’ rating on the stock.
Motilal Oswal said Paytm denied recent speculations that the company was losing out on lending partners. It currently has seven NBFC partners for loan distribution, while it is in process of integrating one large bank and two large NBFCs by Q4FY24 and Q1FY25.
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“The company indicated that the recent increase in risk weight by the RBI is not likely to impact its growth, as it has adequate number of partners to support growth. Paytm expects robust growth in merchant loans and healthy growth in personal loans, aided by higher ticket size lending. Postpaid will be calibrated toward lower growth,” the brokerage said while suggesting a target of Rs 1,025 on the stock.
“We trim our FY24/FY25 disbursement estimates by 15-18 per cent, resulting in an 11-16 per cent cut in our adjusted Ebidta over FY24E/FY25. We value Paytm at 20 times FY28E EV/Ebitda and discount the same to FY25E at a discount rate of 14 per cent,” it added.
Morgan Stanley reportedly maintained its equal weight on the stock with a target of Rs 830. JPMorgan and Goldman Sachs have downgraded the stock to ‘neutral’. The former finds the stock worth Rs 900 against Rs 1,200 earlier, the latter sees the stock at Rs 840. Jefferies reportedly maintained its ‘Buy’ on the stock but lowered its target to Rs 1,050 against Rs 1300 earlier. Bernstein, meanwhile, has reduced its target on Paytm to Rs 950 from Rs 1,100 earlier.
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JM Financial said the rally in the Paytm shares since 2022 lows was led by strong uptick in loan distribution business revenues and operational efficiencies thereof. With a “slightly abrupt” pullback on a key growth lever, this brokerage expects Paytm’s stock price to leep reacting negatively until growth trends stabilise and new strategy plays out.
“We’ve revised Paytm’s FY24E Ebitda loss to Rs 680 crore (down 11 per cent and adjusted Ebitda to Rs 760 crore) and FY25E Ebitda to Rs 470 crore (down 31 per cent and adjusted Ebitda to Rs 1,500 crore) and reduced our target price to Rs 1,120,” JM Financial.
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