Analysts view on Paytm Q3 results

Post Q3 results, foreign brokerage houses such as Citi, Goldman Sachs, Bank of America (BofA), CLSA have recommended a “Buy” rating on Paytm shares and raised target price by up to 120%. While Citi, CLSA, and Goldman Sachs have assigned “Buy” rating to the stock, BofA maintained its 'neutral' rating.

Goldman Sachs

The agency has assigned a ‘Buy’ rating, citing that Paytm’s current share price continues to offer a compelling entry point into India’s largest and one of the most profitable fintech platforms. Goldman Sachs said Paytm’s valuation multiples are at a discount to the global/India peer group, for a growth outlook that is better or in line with the peer group. It has given a price target of ₹1,150, an upside of 119% from current market price.

“Not only do we expect profits to sustain, but with continued strong traction in disbursals, operating leverage, and UPI reimbursement in Mar ’23, we expect adjusted EBITDA margin to expand to 6% in Mar ‘23 (vs +2% in Dec ’22), with c.US$190 mn in adjusted EBITDA by FY25, one of the highest within our India internet coverage,” it said in a report.

Citi

The foreign brokerage has also given “Buy” rating with a price target of ₹1,061, saying that Paytm delivered Adj. EBITDA before ESOPS three quarters ahead of guidance on in-line revenues (+42% YoY), driven by resilient net payment margins, sharply lower A&P spends and overall fixed costs controls. It added saying that Paytm continues to leverage well its payments platform (85mn MTUs, 6mn device merchants) to drive lending distribution, with significant headroom for growth ahead.

Bank of America

Bank of America has a neutral recommendation on Paytm with a price target of ₹730 per share. It seems optimistic on fundamentals and sees room for Paytm to scale up aggressively without taking any balance sheet risks. While Paytm has key differentiating factors versus peers, overall given higher competition & additional regulatory risks, BofA expects a slower path to monetisation leading to delayed EBITDA breakeven.

CLSA

CLSA has also recommended “Buy” rating with a target price of ₹750, saying that Paytm recorded a strong performance in 3QFY23 as it posted positive Ebitda (ex of ESOP costs), beating its own guidance of break-even by Sep-23 by a margin of three quarters. It added that Paytm’s revenue was largely in line as beats in other financial services and commerce revenue made up for a miss in payments.

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