One97 Communications, the parent company of fintech giant Paytm, is set to unveil its financial results for the second quarter of fiscal 2023-24 (Q2FY24) on October 20, 2023. Projections by analysts and prominent brokerage firms suggest robust revenue growth for the fintech major, primarily driven by significant loan disbursements. Paytm’s stock price has attracted substantial investor interest after reaching an all-time low of ₹438.35 per share on NSE. This downtrodden stock touched its record low and subsequently experienced a substantial rebound, with value investors showing strong interest. Over the past three months, Paytm shares have surged by over 16%, and their year-to-date (YTD) performance shows a remarkable increase of more than 86%. The stock has also demonstrated a strong gain of over 56% in the past year. Goldman Sachs has expressed optimism regarding the future performance of Paytm’s share price and has set a long-term target of ₹1,250 per share.
Goldman Sachs’ report explains its positive outlook, stating, “Paytm’s operational metrics have been exceeding expectations, leading us to raise our EBITDA estimates for FY24-26 by 2-5%. Consequently, we have revised our target price to ₹1,250 (previously ₹1,200). We anticipate a 30% year-on-year revenue growth for Paytm in 2QFY24 (September 2023; results to be disclosed on October 20), ranking at the higher end within our coverage of the Indian internet sector. We expect a 6.3% EBITDA margin (excluding ESOP; it was 3.6% in 1Q). With a projected EBITDA of US$200 million in FY25, we continue to view Paytm as the most profitable company within the Indian internet sector and foresee the potential for the company to achieve a positive net income in FY25, which could act as a catalyst for the stock.”
In the past two years, Paytm has experienced significant growth, with its revenues tripling. Gross margins have risen from 13% to 54%, positioning the company on a path to profitability. Despite having only 5% user penetration, Paytm has witnessed a tenfold increase in loan disbursals, exceeding $8 billion. In the payments sector, revenues have expanded by around 2.5 times, driven by the expansion of the merchant subscription business. Margins have increased by 20 percentage points, largely due to favorable industry trends and the strategic decision to discontinue unprofitable operations. Fintech leader Paytm is expected to join the ranks of large, profitable fintech companies globally within four quarters. However, the company’s share price has yet to fully reflect this transformed profile, as noted by global brokerage firm Jefferies. Jefferies has initiated coverage on One 97 Communications, the parent company of Paytm, with a ‘Buy’ rating and a target price of ₹1,300 per share, which implies a potential increase of more than 37% from the closing price on Wednesday.