The shares of Paytm parent One97 Communications hit a 52-week high on November 28, at a time when global brokerage has more than doubled its target price on the stock. It now expects Paytm shares to touch ₹1000.
UBS has retained its ‘neutral’ rating of the fintech stock but has raised the target price by 104% to ₹1000 from ₹490 earlier. This implies a potential upside of nearly 9% from the closing price of November 27.
The brokerage said significant improvement has been priced in. It noted that now that most of the firm’s regulatory issues have been resolved. Business performance is now key to watch, UBS said.
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According UBS, Paytm needs to focus on two key things
-Customers: The brokerage noted that Paytm’s monthly transactional users are down 30% compared to the time before RBI’s action. Earlier on January 31, the Reserve Bank of India barred Paytm Payments Bank from undertaking any banking activities whatsoever — no deposits, no credit transactions, no wallet top ups, no bill payments, nothing — after February 29.
-Market share: UBS has highlighted that Paytm’s digital payment market share is down to 18.5% from 24% pre-RBI action.
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In the weeks that followed the RBI action, Paytm shares hit an all-time low of ₹310. At today’s intraday high of ₹950, the stock has recovered more than 200% from the low it hit on May 9.
In a month’s time, the fintech stock has given investors a return of more than 28% as against the 1.4% decline in benchmark Nifty 50.
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In its latest note, UBS said that Paytm’s net payment margins are ahead of its estimates and it expected the company’s adjusted earnings before interest, taxes, depreciation, and amortisation (EBITDA) to break-even likely in the fourth quarter of 2024-25 fiscal.
UBS has pegged FY26 revenue for Paytm at the FY24 level i.e. at ₹99 billion (or ₹9,978 crore).
At 2:30 pm, Paytm shares traded 2.63% higher at ₹943.10 on NSE.
