Paytm’s parent company, One97 Communications Ltd, saw its shares surge by 7% on Monday, fuelled by a favourable report from Dolat Capital.
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The brokerage maintained a “buy” rating on the stock and raised its target price by 30% to Rs 920 per share, significantly above the current market price.
At 2:56 pm, shares of Paytm were trading over 7.02% higher at Rs 736.70 on the Bombay Stock Exchange (BSE).
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Dolat Capital highlighted several key developments over the past three months that indicate easing challenges and improving prospects for Paytm’s various business segments.
Some notable advancements include the successful completion of the Paytm handle migration, the clearance of regulatory hurdles with Foreign Direct Investment (FDI) approval for the Payment Aggregator (PA) license, and stable market share as evidenced by recent UPI consumer data.
Additionally, the company’s partner network in financial distribution has been expanding.
The brokerage believes Paytm is on track to achieve adjusted EBITDA breakeven by the fourth quarter of FY25, excluding UPI incentives, with positive cash flow anticipated.
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Dolat Capital described the business as resilient and well-positioned for robust growth.”We have realigned our FY25 and FY26 estimates considering the improving business landscape and the divestiture of the events business for Rs 2,000 crore,” Dolat noted in its latest report.
The company is expected to recover following recent disruptions from Paytm Payments Bank Limited (PPBL) and Postpaid impacts.
Despite these challenges, Paytm benefits from a diverse range of use cases, a substantial customer base of over 78 million monthly transacting users (MTUs) and 150 million annual transacting users (ATUs), and a strong technological platform.
Dolat Capital’s report stated that this positions the company to capitalize on India’s rapidly growing digital payments landscape.
The brokerage has predicted significant revenue growth for Paytm over the next decade, projecting steady profit growth starting from FY26. It views Discounted Cash Flow (DCF) valuation as the most appropriate method to capture the long-term potential of the business.
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Dolat projects Paytm’s growth in two phases: a revenue compound annual growth rate (CAGR) of 28% from FY25 to FY30, followed by an 18% CAGR from FY30 to FY40.
The company is expected to achieve profit after tax (PAT) profitability by FY26, with a steady EBIT margin of approximately 16.1% from FY31 to FY40.
Dolat’s DCF model assumes a 12% cost of capital and a terminal growth rate of 2% beyond FY40.
