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ICICI Securities initiates coverage on Paytm with 'buy' rating

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ICICI Securities initiates coverage on Paytm with 'buy' rating

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ICICI Securities has assigned a 'buy' rating to Paytm parent One97 Communications with a target price of Rs 1,352. Below-expected monetisation through Paytm's financial services business and unfavourable regulatory outcomes are key risks, according to the brokerage.  

ICICI Securities initiates coverage on Paytm with 'buy' rating
ICICI Securities initiated coverage on Paytm parent One97 Communications on Friday with a 'buy' rating. The brokerage assigned a target price of Rs 1,352 to the Paytm stock, which has hit a series of lows in the recent past. Paytm is optimising and monetising its user funnel to drive customer lifetime value.
The brokerage mentioned below-expected monetisation through the company's financial services business and unfavourable regulatory outcomes as key risks.
According to ICICI Securities, Paytm calls for evaluation and assessment quite differently and distinctly, given its management’s high growth aspirations calling for significant investments and cash burn, rapidly evolving business model, highly competitive landscape with low switching cost, regulatory uncertainties and few unfavourable outcomes. 
Paytm has built a sizeable two-sided digital ecosystem with proven leadership in payments, commanding a market share of more than 40 percent mobile payments and more than 25 percent digital P2M transactions.
Here are some highlights of what ICICI Securities said on Paytm:
  • Target addressable market signifies immense growth potential, reinforcing management vision
  • Expect commerce GMV to grow at more than 30 percent over FY22-FY26E
  • Some visibility on positive EBITDA margin post-FY26E
  • Positive catalysts can swing earnings delta
  • Consumer, merchant ecosystem core to Paytm biz model, unit economics
  • ALSO READ
    One97 Communications shares hit a fresh low on Monday. At the current level, the stock is available at a discount to the tune of 62 percent to its issue price.
    Stocks of new-age businesses such as Paytm have seen a series of losses in the recent past, mirroring the trend on the Nasdaq, where investors have suddenly lost appetite for highly valued tech and platform companies.
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