Neutral One 97 Communications; target of Rs 600: YES Securities

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26 Aug, 2025 12:21

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The share of Financial Services in overall revenue continues to rise even as there were some negative one-offs for the quarter: Total revenue was 42% YoY to Rs 20.62bn for the quarter, driven by merchant subscription, loan distribution and commerce business. The quarter was negatively impacted by the timing of the festival season and lack of UPI incentive for the quarter. The Financial Services revenue was up 257% YoY to Rs 4.46bn for the quarter, contributing 22% to total revenue. This was driven by loan distribution as the value of loans disbursed amounted to Rs 99.58bn for the quarter, up 357% YoY. There were a variety of factors aiding both contribution margin as well as EBITDA margin, with EBITDA before ESOP cost turning positive: The improvement in contribution margin was driven by payments profitability and growth of high-margin businesses such as loan distribution. Indirect expenses as a percentage of revenue has declined to 49% for the quarter compared with 53% for 2Q and 58% in 3Q last year. As a result, EBITDA before ESOP cost as a percentage of revenue has turned positive at 2% for the quarter, for the first time, compared with -9% in 2Q and -27% in 3Q last year.

We maintain ‘Neutral’ on PAYTM with a revised price target of Rs 600: We value PAYTM at 3.9x FY24 P/S to arrive at our price target of Rs 600.

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