Paytm spikes 3% after rise in July payment volumes; brokerages maintain bullish stance

Shares of Paytm spiked 3 percent in trade on August 4, after the company saw a jump in merchant payment volumes. At 12:00 pm the Paytm stock was trading 3.06 percent higher at Rs 791 on NSE.

The Paytm operator has recorded merchant payment volumes at Rs 1.47 lakh crore for July 2023, growing 39 percent year on year basis (YoY). Loan distribution business (in partnership with lender partners) continued to gain scale with disbursements of Rs 5,194 crore, growing 148 percent YoY, with 43 lakh loans disbursed in July 2023 through the Paytm platform, rising 46 percent YoY. Average monthly transacting users at 9.3 crore jumped 19 percent YoY.

Brokerage Views

CLSA has given a ‘buy’ rating to the Paytm stock with a target price of Rs 1,050 per share. The brokerage firm further stated that, “Paytm has witnessed healthy growth in business metrics but fixed costs of the company are rising. The EBITDA estimates have been lifted by 9-12 percent and the company is expected to generate free cash flow over next few quarters.”

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Citi has increased its target on the stock to Rs 1,200 per share from Rs 1,160. Overall, gains in net payment margins more than offset lower lending distribution take-rates & higher fixed costs’ increase according to the brokerage house.

Also Read: Paytm Chief Vijay Shekhar seeks PLI scheme for payment devices

Brokerage firm Goldman Sachs said Paytm is firmly on track to be the most profitable India internet company starting FY25 and suggested a target of Rs 1,200 on the stock.

JPMorgan has suggested a target of Rs 950 on the stock. Key stock drivers from here are likely to be the clearance of regulatory overhangs and free cash flows (FCF) & profit after tax (PAT) breakeven, the firm said. “We think Paytm can be the first Indian B2C internet stock to trade on profit rather than revenue multiples,” it said. Meanwhile, BofA Securities suggested a target of Rs 1,020 on the stock.

Stock Performance

Paytm stock has given a return of 37.47 percent over the last six months. The stock has thus outperformed the benchmark Nifty50 index by a considerable margin as the benchmark index has given a return of 9.10 percent over the same duration.

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