Neutral One 97 Communications; target of Rs 950: Motilal Oswal

Motilal Oswal recommended Neutral rating on One 97 Communications with a target price of Rs 950 in its research report dated January 20, 2025.

Broker Research

January 21, 2025 / 13:19 IST

Neutral

26 Aug, 2025 12:21

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Motilal Oswal's research report on One 97 Communications

One 97 Comm. (PAYTM) reported a net loss of INR2.1b, lower than our estimated loss of INR3.6b due to better revenues and lower indirect and ESOP cost. Revenue from payments rose 6% QoQ to INR10b, while revenue from financial services grew 34% QoQ to INR5b, aided by DLG loans, which have better revenues. Total revenue thus grew 10% QoQ to INR18.3b (largely in line), while GMV stood at INR5.04t (in line, 13% QoQ). Subscription revenue improved owing to an increase in merchants and revenue per merchant, while disbursements rose 6% QoQ from the lows of 1Q (down 64% YoY). Net payment margin grew 5% QoQ (down 35% YoY) to INR4.9b (10bp of GMV vs. 10bp in 2QFY25), while contribution margin declined to 52.5% amid higher direct expenses (owing to DLG cost) and higher payment processing charges. We largely maintain our contribution profit estimates.

Outlook

We estimate PAYTM to turn EBITDA positive by FY27. We value PAYTM at INR 950, based on 18x FY30E EBITDA discounted to FY26E, which corresponds to 6.1x FY26E sales. We retain NEUTRAL rating on the stock.

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