Buy One 97 Communications; target of Rs 1350: Emkay Global Financial

Emkay Global Financial' research report on One 97 Communications

One97 Communication (Paytm)’s Q1FY26 revenue was in line with Street estimates, while profitability significantly beat expectations. Contribution margin increased by 400bps QoQ to 60%, on considerably lower DLG costs as Paytm’s largest lending partner is making disbursements under the non-DLG model as against the DLG model in previous quarters. We believe lenders’ willingness to offer loans without DLG is a testimony to the improved asset quality of the merchant loan portfolio. Paytm is executing well on acquiring merchants, leveraging its superior Soundbox products and distributing loans to them. With low penetration of loans, we see a long growth runway for this business. The stock trades at 29x FY28E EV/EBITDA.

Outlook

Considering cash on books of Rs12.9bn, the long growth runway for payments and financial services, and the various optionalities (such as BNPL, Wallet, scale-up of Rupay Credit Cards), we believe the risk return is attractive. We retain BUY with TP of Rs1,350.

For all recommendations report, click here