Paytm share price closes 3% higher in weak market, brokerage sees 55% upside; know buying rationale

Paytm share price target: Paytm share price jumped over four per cent in a weak market on the BSE on Monday. Shares of Paytm jumped 4.47% on Monday's intraday trade to Rs 665.95 per share on the BSE. Shares of online payment solutions provider, which were trading at a discount of around 67% from their 52-week high value on Monday's opening price, can surge around 55% from current levels. Paytm stock price closed three per cent higher to Rs 657.25 per share on the BSE on Monday.  

Global brokerage firm JP Morgan maintained an Overweight rating on the counter with a target price of Rs 1000, an upside of 55.4% on Monday's opening price of Rs 645 per share.  

JP Morgan bullishness was based on company's ability to drive monetization and profits across several segments.  

"PAYTM is the leading “fintech horizontal” in India, having built more sources of monetization across payments, commerce and financial services than all of its competitors. This gives it the unique ability to drive monetization and profits across several segments at lower CAC (customer acquisition cost) vs peers," it said in a note.  

It expects PAYTM to see strong revenue growth across all its business segments, thanks to device monetization in payments, financial services cross-selling, ticketing recovery and rising ad monetization.  

"We see it retaining the highest revenue and profit levels among local vertical and global horizontal peers. We value PAYTM using a DCF valuation baking in rising cost of capital with a 18.5% COE and 20x exit multiple that yields a March-23 PT of Rs1,000 ," said the brokerage.  

It said lower-than-anticipated growth in MTU (monthly transacting users) and GMV/MTU and  lower-than-anticipated growth in loans and risk of unestablished portfolio credit behavior can pose threat to price target. Adverse regulatory risks to payment MDRs and restrictions on digital lending can also be a risk to rating and price target, underlined JP Morgan.  

Shares of Paytm, the then biggest IPO in India's capital market history, had made a tepid debut on exchanges, NSE and BSE, in November last year. Paytm shares opened at Rs 1,955 on the BSE, below 9% over the issue price of Rs 2,150. On the NSE, Paytm shares were listed at Rs 1950.