Shares of Paytm-owner One97 Communications Ltd. spurted more than 3 percent on Monday as brokerages projected potential gains of up to 66 percent to the stock after the digital financial services provider reported March quarter earnings and business updates for April.
Goldman Sachs has a buy recommendation on shares of Paytm with a price target of Rs 1,150 per share. This implies a potential upside of 66.7 percent from Friday’s closing price.
The brokerage noted that the March quarter results were in line with its expectations and improving credit metrics were an additional positive.
Goldman Sachs expects Paytm to become the most profitable company within India Internet coverage starting financial year 2025, with EBITDA excluding ESOP cost of $191 million and $322 million in financial year 2025 and 2026 respectively.
It also expects Paytm to turn in a net profit from financial year 2025. "Resolution of outstanding regulatory issues (ban on PPBL and online merchant onboarding) would be the next set of catalysts for the stock," it mentioned.
“Streamlined focus, consistent execution on profitability & its unique strengths keep Paytm on target to tap an attractive profit pool,” JPMorgan said in a note.
Key stock drivers are likely to be the clearance of regulatory overhangs and remain free cash flow breakeven, and profit after tax breakeven. It expects both of these events to take place in financial year 2025.
The brokerage expects Paytm to be the first Indian B2C internet stock to trade on profit rather than revenue multiples. JPMorgan is overweight on Paytm with a price target of Rs 950.
CLSA also assigned a ‘Buy’ recommendation on Paytm with a price target of Rs 850, which is a potential upside of 23 percent.
Paytm on Friday reported a 51.5 percent growth in consolidated revenue from operations to Rs 2,334.5 crore during the March quarter compared to Rs 1,540.9 crore a year ago on the back of an increase in GMV, growth of loans distributed through its platform and higher merchant subscription revenues.
Shares of Paytm are trading 3.8 percent higher at Rs 715.5.
