ICICI Securities research report on One 97 Communications (Paytm)
One 97 Communications (Paytm) during its analyst meet yesterday (1st Dec’22) reiterated its continued focus on improving profitability. Management stated that the journey to attain operating profitability (EBITDA before ESOP cost) via consistent margin improvement has exceeded its expectations in the past few quarters. It further emphasised its target to become an FCF-generating company in the next 12- 18 months. Management also enhanced clarity around the company’s business model by providing additional disclosures with respect to net payment take-rate of 7-9bps, average subscription fee (of Rs100 per month per active device), 2.5-3.5% take-rate on loan sourcing and 0.5-1.5% on collections, etc. Besides, the management pointed at growth drivers in the various business segments and threw light on how it plans to generate free cashflow (FCF). Lastly, clarifications provided around regulatory developments with no onerous outcome provide further comfort.
Maintain BUY with an unchanged target price of Rs1,285 based on customer lifetime value methodology. We discuss key takeaways from the analyst day below.