Brokerages have given a mixed outlook on Paytm, with Motilal Oswal (MOSL) maintaining a Neutral rating with a target price of ₹870, while Jefferies has a Hold rating and set a target price of ₹850. Analysts remain cautious about declining UPI incentives but see potential in the company’s merchant business growth.
Motilal Oswal on Paytm: Neutral, TP ₹870
Motilal Oswal revised its target downward to ₹870 (earlier ₹950), highlighting gradual improvement in the merchant business. The brokerage expects EBITDA breakeven by FY27 and 24% CAGR in GMV over FY25-27.
Key insights:
- Financial services are expected to contribute 27% of total revenue by FY28E (~20% in FY24).
- Cost control and reduced capex and depreciation expenses should drive positive adj. EBITDA by Q4FY25.
- Profitability expected to strengthen, with an estimated PAT of ₹12.1 billion in FY27E.
- Concerns remain over macroeconomic challenges, UPI market share moderation, and financial distribution business traction.
Jefferies on Paytm: Hold, TP ₹850
Jefferies maintained its Hold rating, citing risks from lower government UPI incentives and the potential impact on earnings.
Key takeaways:
- Govt incentives for UPI P2M transactions (<₹2K) cut to ₹15 billion, despite 40% YoY transaction growth.
- Paytm’s incentives could drop from 20bps to 6bps, putting pressure on revenue and margins.
- FY25 adjusted EBITDA may fall 50% below estimates, while FY26-27 earnings could decline by 20-30%.
- PBT for FY25E may be 15% lower than previous forecasts.
- A potential shift to MDR-based charges for large merchants could improve profitability and earnings predictability.
Conclusion
While Motilal Oswal highlights long-term business growth, Jefferies remains cautious about earnings risks due to declining UPI incentives. Investors should watch for Paytm’s revenue strategy shift, UPI incentives impact, and merchant business performance to assess future profitability.
(Disclaimer: This article is for informational purposes only and does not constitute financial advice.)
