Analyst Sees Big Gains for Paytm

Haitong Securities initiated coverage on One97 Communications, the parent company of digital payments firm Paytm. The brokerage assigned an 'outperform' rating with a price target of ₹1,410, signaling a potential 25.5% upside for the stock.

Growth Driven by Payments and Merchant Digitization

Haitong's optimism is rooted in Paytm's leading position within India's fast-expanding digital payments market. The firm highlighted that Paytm's focus on digitizing small and medium-sized merchants has significantly improved its revenue generation capabilities. Factors like an increasing share of payments tied to Merchant Discount Rate (MDR) and continuous product innovation are expected to boost Paytm's core payment margins.

Lending Paves Way for Profit Growth

Paytm's established merchant lending business, supported by its extensive on-ground network, is anticipated to attract more partnerships with lenders. This, combined with operating efficiencies, is projected to drive a substantial increase in Paytm's core EBITDA margin, reaching an estimated 17% by FY2028. Haitong forecasts both core EBITDA and net profit to quadruple between FY26 and FY28, with Return on Equity (RoE) improving to 12% by FY28.

Stock Falls Despite Positive Forecast

Despite the analyst's upbeat initiation, Paytm shares saw a nearly 4% decline on Monday, April 13. While the stock recovered from its intraday lows, it closed 1.6% lower at ₹1,106. This stock movement contrasted with Haitong's positive outlook, suggesting other market forces influenced trading. Year-to-date, Paytm shares are down 14% and remain considerably below their IPO price of ₹2,150.

Broad Analyst Sentiment Remains Positive

The broader analyst community generally views Paytm favorably. Among 21 analysts tracking the stock, 15 recommend 'buy', five suggest 'hold', and one has a 'sell' rating.