Last Update: April 20, 2023, 2:24 PM IST
![Motilal Oswal Securities said Paytm has reported a healthy traction in growing its gross merchandise value (GMV) at a CAGR of 55 per cent. Motilal Oswal Securities said Paytm has reported a healthy traction in growing its gross merchandise value (GMV) at a CAGR of 55 per cent.](https://images.news18.com/ibnlive/uploads/2021/07/1627283897_news18_logo-1200x800.jpg?impolicy=website&width=510&height=356)
Motilal Oswal Securities said Paytm has reported a healthy traction in growing its gross merchandise value (GMV) at a CAGR of 55 per cent.
Suggesting that Paytm’s two-pronged strategy will drive profitability, the brokerage said Paytm has achieved break-even in adjusted EBITDA.
Paytm shares gained ground on Thursday after domestic brokerage Motilal Oswal Financial Services initiated coverage on the digital payments firm’s stock with a ‘buy’ rating and target price of Rs 865 – up 34.2 per cent from its closing price on Wednesday. Possibility.
In the last one month, One 97 Communications share price has gained up to 18 percent in the last one month, while in YTD time, this fintech stock has gained 24 percent.
Suggesting that Paytm’s two-pronged strategy will drive profitability, the brokerage noted that Paytm achieved breakeven in adjusted EBITDA in the December quarter, well ahead of its guidance. It added that its operating profit growth will continue to be driven by continued improvement in contribution margin and operating leverage.
“Thus we estimate Paytm to achieve EBITDA break-even by FY25 with an EBITDA margin of 3.2 per cent. We anticipate its revenue and contribution profit to grow at a CAGR of 26 per cent and 32 per cent during FY23-28. Thus we value Paytm on the basis of 18 times FY28E EV/Ebitda and discount the same in FY25E at a discount rate of 15%, thus the stock is valued at Rs 865, which means FY25E Price for Sale 4.5 times of
Motilal Oswal Securities said Paytm has reported a healthy traction in its gross merchandise value (GMV) at 55 per cent CAGR in FY 2019-23. While the growth was slightly soft due to Covid-19, the same picked up strongly post Covid, it said.
“GMV witnessed 81 per cent CAGR in FY21-23. With increasing use cases, we expect GMV to report a healthy 27 per cent CAGR over FY23-25. Paytm registered a steady growth of 9 crore MTUs till FY23, while the number of subscription payment instruments grew to 68 lakhs. As penetration among merchants remains low, we expect the traction to continue with a quarterly addition of 1 million devices. We anticipate payments revenue thus expecting a healthy 21 per cent CAGR in FY 23-25.”
MTU stands for Monthly Transactional User. Motilal Oswal said Paytm’s MTUs provide consumers with a ready-made customer base to sell financial products; Whereas, strong growth in subscription devices helped improve throughput and supported growth in merchant loans. The brokerage said Paytm registered a 4.6x increase in the value of loans disbursed to reach an annual run-rate of Rs 50,000 crore. It forecasts disbursements to report a steady 64 per cent CAGR in FY23-25, thus increasing the mix of financial revenues to 31 per cent. It increased from 30 per cent in FY12 to 56 per cent in FY25.
“Paytm has seen moderation in payment processing fees, marketing activities and promotional spends in recent years. Hence, direct expenditure has come down to 54 per cent of revenue in 9MFY23 from 162 per cent in FY19. Similarly, indirect expenditure has come down from 69 per cent of revenue to 54 per cent in FY2019. While Paytm will continue to invest in growth and merchant base expansion, improvement in operating leverage will nevertheless aid profitability,” it said.
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