‘Buy’ rating on Paytm initiated by Citigroup, Target price raised by 32%
- ByStartupStory | April 18, 2022
Citigroup Research, the global brokerage firm has initiated buy rating on Paytm owner One97 Communications Ltd and raised its target price to about Rs 910 a share, up 32 percent from its current levels.
According to Bloomberg, the stock currently has five buys, two holds and three sells. The stock was trading at Rs 664 on BSE, at 3 pm, down by 3.6 percent from its previous close.
Nearly 70 percent of the stock has fallen from its IPO price of about Rs 2,150 led by regulatory headwinds and profitability in the payments verticals has been the concerns.
However, Paytm’s valuations look attractive, Citigroup Research thinks these views are too pessimistic and at the current market price.
For PMs’ museum, Paytm becomes the official digital payments partner. With online verticals including merchant payments, travel and entertainment ticketing, buy-now-pay-later (aka BNPL) and MSME lending, Paytm is one of the largest digital payments platforms.
To launch and scale new use cases rapidly, thereby potentially further expanding total addressable market (TAM), has been enabled by Paytm’s fullstack technology platform and integrated ecosystem and customer/merchant base, the report added.
They expect Payments GMV to grow at 44 percent CAGR by over FY22-26E to $500 billion and overall revenues (incl. financial services) to reach about Rs151 billion ($2.1 billion)–32 percent growth CAGR. In FY25E (management guidance: 2HFY24) & Adj. EBITDA margins at 11 percent in FY26E (US$236mn), they expect Adj. EBITDA break-even, Citigroup Research report said.
A substantial discount to Zomato/Nykaa which trade at 12x/27x FY24E EV/GP, Paytm currently trades at 7x FY24E EV/Gross Profits. Paytm will still trade at a discount at 11x multiple, at our TP of Rs910/sh, it said.
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