ICICI Securities has increased its target price for One 97 Communications (Paytm) to ₹1,498. The brokerage points to strong operational performance and the integration of artificial intelligence as key drivers for future profit margin improvement.
Detailed Coverage
ICICI Securities has updated its outlook on One 97 Communications, commonly known as Paytm, maintaining a positive view on the digital payments company. The brokerage revised its target price for the stock to ₹1,498, up from the previous estimate of ₹1,390.
Drivers of the Revised Outlook
The revision in the target price is primarily linked to the company’s ability to manage its costs while growing its core business. According to the analyst report, Paytm is showing effective operational leverage, where revenue growth is expected to outpace the rise in fixed expenses. Specifically, projections indicate that gross revenue could grow by 22% year-on-year in FY26 and 28% in the first quarter of FY27, while fixed costs are anticipated to increase at a slower rate of 16% and 6% for the same periods respectively. The brokerage highlighted that the company’s adoption of artificial intelligence across its various business lines is expected to play a crucial role in expanding profit margins to a target range of 15% to 20% over the next two to three years.
Valuation and Market Context
To arrive at the new target price, ICICI Securities adjusted its valuation model. The firm now applies a 50x multiple, up from 45x, to the estimated earnings per share for the financial year 2028. This calculation is based on an estimated earnings figure of ₹20.3 billion and a diluted share count of 679 million.
While this report offers a positive view on the company's operational execution, investors should note that the digital payments sector in India remains highly competitive. Paytm faces ongoing pressure from other unified payments interface (UPI) players and evolving regulatory requirements that govern the fintech space. The company’s long-term financial performance will depend on its ability to sustain this margin expansion while navigating a crowded market and balancing its lending and payment services.
Investors may monitor upcoming quarterly results to see if the actual revenue and margin figures align with these projections. Tracking management commentary on the effectiveness of AI integration and any updates regarding regulatory compliance will also be essential for understanding the company's progress toward these long-term targets.