Bernstein Bets Big on Paytm with Rs 1,100 Target
- Bernstein reaffirms 'Outperform' rating on Paytm, projecting a 27% upside.
- High-margin lending business expected to grow 3.6x by FY30, boosting revenue.
- Aggressive cost-cutting and steady merchant-side performance drive profitability.
Global investment firm Bernstein has reiterated its 'Outperform' rating on One97 Communications Ltd (Paytm), setting a target price of Rs 1,100 implying a potential 27 per cent upside from current levels. In its latest report titled 'Paytm: What Do You Need to Believe Now?', Bernstein highlights Paytm’s resilient comeback from regulatory disruptions earlier in 2024, noting the company is now nearing break-even with renewed investor confidence in its business model.
The report projects Paytm’s earnings per share (EPS) to rise non-linearly from Rs 1.5 in FY26E to Rs 70 by FY30E, underpinned by a robust 22 per cent CAGR in revenue and just 13 per cent CAGR in costs over FY25-30. This optimistic forecast is largely driven by Paytm’s high-margin lending segment, where merchant and personal loan volumes are expected to grow 3.6 times from FY24 levels.
Bernstein also highlights the strength of Paytm’s merchant-side operations, noting that its UPI share remains steady and fee-paying merchant numbers, along with loan volumes, have surpassed pre-regulatory levels. Additionally, Paytm's cost efficiency-particularly through curbing indirect expenses is cited as a key contributor to its improving profitability.
Catalysts that could further bolster Paytm’s performance include the possible approval of its Payment Aggregator license, revival of Paytm Payments Bank (PPBL), and the return of wallet and Buy Now Pay Later (BNPL) services. On the consumer side, the firm acknowledges ongoing recovery but expects marketing revenues to grow at a 15 per cent CAGR as Monthly Transacting Users (MTUs) rebound gradually.
Despite past challenges, Paytm's stock has already surged 103.5 per cent in the past year. Bernstein concludes that the company is 'well-positioned for a strong comeback' in the coming years.
