Buy One 97 Communications; target of Rs 1050: Emkay Global Financial

Emkay Global Financial is bullish on One 97 Communications has recommended buy rating on the stock with a target price of Rs 1050 in its research report dated January 15, 2025.

Broker Research

January 17, 2025 / 10:23 IST

Buy

Emkay Global Financial's research report on One 97 Communications

Recent NPCI approval (Oct-24) released a major regulatory overhang, which should help it rebuild the MTU base in the next 12-18M and thus cross-sell retail financial products like loans (for eg: HL), insurance, and wealth products, thereby improving revenue per user. This, coupled with continued strong traction in merchant device subscription revenue, rising share of UPI on CC with MDR, accelerating merchant loan business with a better take rate, continued cost optimization, and rising non-operational income (including treasury income on proceeds from recent stake sale in the entertainment business/PayPay Corp) should put Paytm on the early path to profitability by FY26E, with acceleration thereafter. Paytm’s Cash/MCap stands at 21% vs 5% for Zomato, which we believe, provides strong margin of safety and can be used to accelerate business organically/inorganically or even reward shareholders via dividend/buyback. Additionally, further easing of regulatory stance via potential approval for payment aggregator license could be a positive catalyst.

Outlook

We upgrade Paytm to BUY from Add with revised DCF-based TP of Rs1,050 (earlier Rs750), implying FY27E EV/Op Rev at 4.5x and P/BV at 4.2x.

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