Paytm shares gain 3% ahead of its Q2 results; Jefferies initiates buy

Shares of One97 Communications, the parent company of fintech major Paytm, traded higher by over 2 per cent at Rs 991 ahead of its Q2 results due to be announced later today. At the day’s high, the stock touched levels of Rs 998.3 apiece on the BSE.

The fintech player during the July–September period is seen to log robust operational performance on the back of healthy loan disbursals, as per estimates by most brokerages.

Global brokerage Jefferies has initiated coverage on the counter with a buy call and a target price of Rs 1,300, implying potential gains of over 34 per cent from the previous close. The brokerage sees the payment company turning profitable in the next four quarters, led by substantial growth in the credit business and monetisation.

"In the next 4 quarters, Paytm will turn profitable and be among the few large profitable fintechs globally that enjoy strong growth (>30 per cent), double-digit EBITDA margins, and stable profitability. However, its valuations at 3.6x FY25 EV/revenue remain at a nearly 40 per cent discount to this group," Jefferies said.

Brokerage firm Motilal Oswal expects the company’s revenue from operations to grow 36 per cent year-on-year (YoY) to Rs 2,600 crore, while adjusted EBITDA is expected to be at Rs 180 crore. Net loss at the company is seen contracting to Rs 280 crore during the period under review, as against Rs 570 crore in the Q2 FY23 period. The brokerage has suggested a buy call on the counter with a target price of Rs 1,000.

Paytm’s share price

Shares of the company in the last one year have surged over 50 per cent, with its 52-week low and high prices at Rs 438.4 and Rs 998.3 per share, respectively.

Paytm’s Q1 performance

In the June-ended quarter (Q1FY24), the company’s net loss widened sequentially from Rs 168 crore in the March-ended quarter to Rs 357 crore. However, on a year-on-year (YoY) basis, the net loss decreased as the company reported a loss of Rs 644 crore in the June 2022 quarter.