Paytm Jumps Over 6% on Strong Revenue Growth and Narrowing Losses in Q1; Should you invest?

Paytm shares today: One97 Communications, which owns Paytm, shares jumped more than 6% in intraday trading on Monday after the digital financial services provider reported an 89% increase in revenue in the June quarter to Rs 1,680 crore . Its revenue jumped on the back of an increase in subscription revenue due to the growing number of payment devices, growth in bill payments due to growth in monthly transaction users (MTU), growth in loan disbursements by our partners through our platform and an increase in commerce revenue. Paytm, however, reported a consolidated net loss of Rs 644.4 crore in the April-June period. The net loss widened from a loss of Rs 380.2 crore on an annual basis, but narrowed from Rs 761.4 crore in the March 2022 quarter. The Vijay Shekhar-led company Sharma said it was on track to achieve profitability by the end of the September quarter of the current fiscal year.

During the quarter, Paytm disbursed loans worth Rs 5,554 crore. The loan distribution business has grown significantly over the past 12 months, with increased user adoption. The number of loans, at 8.5 million, increased by 492% year-on-year (YoY), while the value of loans increased by 779% year-on-year to Rs 5,554 crore, the company said.

The stock jumped around 6% to 833.05 rupees per share in early trading on BSE. At Monday’s high, the meter is still trading over 57% off its 52-week high of Rs 1,961.05.

What should investors do now?

Yes Securities analysts said “traction for the bread and butter payment services business was reasonably broad with the consumer and merchant sub-segments contributing Rs 5.19 billion and Rs 5.57 billion. rupees, growing 73% and 67% YoY, respectively.Financial services revenue grew 4x YoY to reach 2.71 billion rupees for the quarter.

Regarding the improvement in net payments margin, the brokerage said: “Net payments
Margin improvement was driven by (1) the company’s ability to negotiate better rates with banks (2) optimizations for better transaction routing, primarily wallet loading via UPI (3) a margin improvement in online payment activities thanks to the streamlining of accounts.

Brokerage Yes Securities upgraded Paytm from ‘Reduce’ to ‘Neutral’. Acknowledging the improved trajectory, the brokerage revised the target price to Rs 850 per share. This is up 8% from Friday’s closing price of Rs 784 per share.

Morgan Stanley maintained an “equal weight” rating and raised its target price from Rs 675 to Rs 785 per share, while JP Morgan retained an overweight rating for a target price of Rs 1,000.

Claiming that a sharp reduction in treatment costs was the main surprise, CLSA recommended a sale. “While our Ebitda breakeven expectation is similar to management’s, the stock takes into account a long-term Ebitda trajectory that we believe is difficult to achieve. We maintain our SELL rating,” he said. Interestingly, CLSA has raised its target price from Rs 500 to Rs 650 for Paytm.

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