Buy One 97 Communications; target of Rs 865: Motilal Oswal

Motilal Oswal is bullish on One 97 Communications recommended buy rating on the stock with a target price of Rs 865 in its research report dated April 20, 2023.

Broker Research

April 20, 2023 / 14:49 IST

Buy

26 Aug, 2025 12:21

Volume

Todays L/H

Motilal Oswal's research report on One 97 Communications

Scale matters: One 97 Communications Ltd (Paytm) is India's leading payments app and FinTech enterprise offering payments, financial services, commerce, and cloud services to its large consumer/merchant base of ~350m/ ~31.4m, respectively as on 3QFY23. It is among the largest payments platform, with GMV of ~INR13.2t in FY23 (INR8.5t in FY22). Huge cross-sell opportunity: The company has grown its Monthly Transacting Users (MTUs) to 90m as of FY23 that provides a ready customer base to cross-sell financial products to consumers; while, robust growth in subscription devices has helped improve throughput and supported growth in merchant loans. -Disbursements to surge: During FY23, Paytm reported a 4.6x jump in the value of loans disbursed to reach an annualized run-rate of INR500b. We estimate disbursements to report a steady 64% CAGR over FY23-25, thus driving the mix of financial revenue upwards to 31%. Contribution margin to expand: Paytm has achieved a breakeven in adjusted EBITDA during 3QFY23, well ahead of its guidance. We estimate contribution margin to improve to 56.8% by FY25 from 30% in FY22, fueled by improvement in operating leverage and rise in financial business mix.

Outlook

Initiate with a BUY: We estimate Paytm to achieve an overall EBITDA break-even by FY25. We value the stock at INR865 based on 18x FY28E EV/EBITDA and discounting the same to FY25E at ~15%, which implies 4.5x FY25E P/Sales. We initiate coverage on the stock with a BUY rating.

For all recommendations report, click here