Indian brokerage firm Emkay Global has changed it's take on fintech major Paytm. Analysts at the brokerage believe that the Vijay Shekhar Sharma led company is poised for a turnaround. Therefore, the brokerage has upgraded Paytm from 'Reduce' to 'Add.' It has also doubled the target price from ₹375 to ₹750 per share.
Emkay mentioned that Paytm's broking and insurance distribution business is gaining scale and has already turned profitable. "It has sold its operationally heavy entertainment business in Q2, which should boost cash buffers as well as reduce net loss in FY25E; it remains open to offload any other non-core business. Factoring in the higher cost optimization, we expect Paytm to again turn operating EBITDA (ex-ESOP and UPI incentive) positive by Q4 FY25E, when gradual business acceleration/reduction in ESOP costs should help it turn overall EBITDA/PAT positive by FY26E/FY27E (earlier FY27E/FY28E)," it added.
"Currently, Paytm trades at a premium (EV/TTM operating revenue: 4x) to profitable global paytech peers like PayPal/Paysafe (2.3x), given India's growth premium, as well as due to its differentiated loan distribution business; however, it is still at a discount to profitable BNPL players like Affirm (4.9x). Paytm’s further rerating will be contingent on faster recouping of lost consumer MTU, strong bounce-back in the lending business as partner/attrition issues ease, and no further regulatory disruption," Emkay further stated.
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