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

Emkay Global Financial's research report on One 97 Communications

Paytm again turned EBITDA (ex ESOP)-positive in 4Q, at Rs0.8bn (Emkay: Rs1.1bn). This was due to lower UPI incentive, which coupled with accelerated cost (Rs4.9bn) on ESOPs surrendered by MD & CEO Vijay Sharma and impairment in subs led to net loss of Rs6.1bn. Though Paytm reduced overall loss in FY25 mainly due to business consolidation and cost optimization, we expect it to turn net profit-positive in FY26 on the back of revenue acceleration from payment as well as the financial services business, higher treasury income on cash balance boosted by recent stake sales, and lower depreciation/ESOP cost. Additionally, potential re-introduction of MDR on high-value UPI transactions and receipt of payment aggregator and wallet license (either its own or on rent) should further boost its revenue/profitability and act as a stock catalyst.

Outlook

We retain BUY with DCF-based TP of Rs 1050, implying FY27E EV/Operating revenue at 3.1x and P/BV at 3.0x.