Paytm Hits 20% Upper Circuit on Day 2 of Post-Q3 Rally


On Tuesday, the share price of One 97 Communications or Paytm rose for the second day in a row. The stock hit a 20% upper circuit in early trading. While the stock has risen by more than 27% in two days. Following good third-quarter results, major brokerages around the world have boosted their target price for Paytm shares. Paytm’s stock is expected to rise by triple digits in the next months.

Paytm shares were trading at 612.75 per share on the BSE at the time of writing, up 9.81% or 54.75. It has a market capitalization of around 39,787.96 crore.

Paytm shares touched a 20% higher circuit of 669.60 per share earlier today in early session.

Paytm shares have started the week on a high note with the release of Q3. On Monday, the share price on Dalal Street finished at 558, up 6.31%. So far this week, the shares on D-Street have risen by at least 27.55%.

The digital financial services provider’s overall net loss shrank dramatically to 392 crore in the December 2022 quarter, down from 778.4 crore the previous year. Meanwhile, revenue jumped 42% to 2,062.2 crore in Q3FY23 from 1,456.1 crore in Q3FY22, driven by greater consumer adoption and subscription services by merchant partners, as well as continued development in loan distribution and commerce sector.

Paytm founder and CEO Vijay Shekhar Sharma stated that the business met its operating profit objective, excluding ESOP costs, during the December quarter.

The fintech reached an operating profitability milestone with EBITDA before ESOP cost of 31 Crore, far ahead of its projected September 2023 deadline.

Brokerages including Citi, CLSA, and Goldman Sachs have suggested purchasing Paytm shares following Q3FY23 earnings, while BofA has maintained its ‘neutral’ recommendation on the stock.

The majority of brokerages lift their Paytm target price:

According to CLSA analysts in their analysis, “Paytm had a good performance in 3QFY23, posting positive Ebitda (ex-ESOP expenses) and exceeding its own projection of break-even by Sep-23 by three quarters. Furthermore, unlike 3QFY22, the business did not record any UPI incentive in 3QFY23, meaning that the Rs1.3 billion top-line projection for 4QFY23 is already confirmed above the regular run rate. As a result, the positive Ebitda trajectory is anticipated to continue.”

“Net payment margin (ex of subscription income) remained virtually constant at 8bp QoQ on an adjusted basis,” CLSA stated. The loan division increased revenue by 28% year on year due to solid execution. Commerce sales also above expectations, increasing 50% year on year with a strong seasonal push.”

CLSA is bullish on the fintech titan following solid third-quarter results. On the value, it stated, “the merchant device subscription business experienced sustained activity as Paytm added 1 million devices in 3QFY23, in line with its earlier projections. We improve our Ebitda ex-ESOP expenses projections for FY25-26CL by 14-20%, and our DCF-based target price rises to Rs750, representing a 43% gain.

Paytm, on the other hand, is rated ‘Neutral’ by BofA Securities. According to the paper, “We are enthusiastic about the fundamentals and see potential for Paytm to expand quickly without putting its balance sheet at risk. While Paytm offers major distinguishing advantages in comparison to rivals, we anticipate a lengthier path to monetization and delayed EBITDA breakeven due to increased competition and extra regulatory concerns. In our opinion, the loan sector presents an upside possibility for Paytm, allowing it to expand up subject to execution.”

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