Paytm shares at Rs 1,120? Goldman Sachs ups price target, says this on Q3 results, guidance

Goldman Sachs has upped its price target for One 97 Communications (Paytm) to Rs 1,120 from Rs 1,100, saying the current share price continues to offer a compelling entry point  into India’s largest and one of the fastest-growing fintech platforms.  

Goldman Sachs said its refreshed analysis suggests Paytm’s current share price is  already pricing in multiple headwinds, with the stock trading  close to its bear-case implied value. The foreign brokerage sees risk-reward skewed to the upside for Paytm shares. Paytm’s valuation multiples are at a discount to global peer group, for a growth outlook that is better or in-line with peer group, Goldman Sachs said.

Goldman Sachs, which expects Paytm to be Ebitda profitable by March quarter -- two quarters ahead of guidance, is expecting December quarter to be another strong quarter for  Paytm, with revenue growth of 45 per cent YoY and further improvement in  adjusted Ebitda losses (by 58 per cent sequentially) to -Rs 70 crore.

"We  believe Paytm’s margin print in Q3 would further increase the Street’s confidence around the company’s ability to be profitable in  CY23. Paytm’s MTU (monthly transacting users), loan disbursals and

devices deployed continue to surprise us positively, and we have  further raised our estimates for these metrics in this note; however,  mix shift towards UPI has also been faster, resulting in cuts to our payment revenue estimates," Goldman Sachs said.

Goldman Sachs said Paytm’s FY23 lending volumes are tracking 90 per cent higher against its estimates in December 2021. This, coupled with stronger payment margins, has resulted in  company’s profitability continuing to surprise to the upside, it said.

Aided by presence of UPI reimbursement from the government of India in the March quarter, it expects Paytm to be adjusted Ebitda  profitable in March quarter, two quarters ahead of its  earlier expectations and the company’s guidance of September 2023.

Goldman Sachs peg Paytm's adjusted Ebitda at $150 million by FY25, which it said would be one of the highest within its India internet coverage.

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