Goldman Sachs sees Paytm as most profitable firm among peers; stock may rise by Rs 500 or 77%

Global brokerage Goldman Sachs said that Paytm – a digital payment services company – shall be the most profitable company within its India Internet coverage starting FY25E. This is mainly due to the company’s continued strong traction in lending and high operating leverage business model, it noted.

Paytm, which operates under the parent company One-97 Communications, had achieved its target for operational profit excluding ESOP cost, the company’s founder and CEO Vijay Shekhar Sharma said in his December quarter results commentary.

 “We, however, expect Paytm’s revenue growth to decelerate to 23 per cent for FY23-25E CAGR on account of a high lending base and slower payments segment growth,” the brokerage added.

According to Goldman Sachs, “The company’s growth profile is in line with its India Internet peers, with profitability higher, and valuations that are at the lower end as compared to its peers.”

The brokerage expects Paytm to report robust Q4FY23 earnings, with revenue growth of 49 per cent year-on-year (YoY) and forecast 10 per cent adjusted EBITDA margin during the March quarter.

Goldman Sachs reiterates a ‘buy’ rating on Paytm with a target price of Rs 1,150 per share, implying almost 77 per cent potential upside in the stock.

Earlier after strong Q3 earnings, Macquarie had a change of heart on Paytm in February as it made a complete U-turn on the counter.

It gave a double upgrade to ‘outperform’ from an ‘underperform’ rating on stock with an increased target price of Rs 800 from Rs 450 per share earlier.

Paytm stock was marginally under pressure during Friday’s session. It was trading near day’s low of Rs 651.05 apiece, down Rs 5.85 or 0.89 per cent from Thursday’s closing of Rs 656.90 a share.

Paytm shares made a market debut in November 2021 at Rs 1,950 apiece, a 9.3 per cent discount to its issue price of Rs 2150 per share. Since its listing, the stock has corrected more than 58 per cent.

The stock has gained around 1.5 per cent in the last one year, in which the Nifty50 has risen over 1 per cent.

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