Bernstein Maintains Positive Outlook on Paytm with Target Price of Rs 1,100

In a recent report, Bernstein has reaffirmed an 'Outperform' rating for Paytm, setting a target price of Rs 1,100, which suggests a 27% upside. The firm highlights Paytm's resilience in recovering from past regulatory challenges and projects significant growth in earnings per share and revenue. Key growth drivers include the high-margin lending business and potential new product offerings. Bernstein's analysis indicates that despite challenges in the consumer segment, Paytm's merchant operations remain strong, positioning the company for a robust comeback in the market.
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Bernstein Maintains Positive Outlook on Paytm with Target Price of Rs 1,100

Bernstein's Analysis of Paytm's Future


New Delhi, June 19: Global investment firm Bernstein has released a new report titled 'Paytm: What Do You Need to Believe Now?' reaffirming an 'Outperform' rating for One97 Communications Ltd (Paytm). The firm has set a target price of Rs 1,100, indicating a potential upside of 27% from current market levels.


Bernstein highlights that Paytm has demonstrated significant resilience, bouncing back from the regulatory challenges faced in early 2024 and nearing break-even once again. The report suggests that many of the previous concerns regarding the sustainability of Paytm's business model have been effectively addressed.


In its base-case scenario, Bernstein forecasts that Paytm’s earnings per share (EPS) will grow non-linearly from Rs 1.5 in FY26E to Rs 70 by FY30E, driven by robust revenue growth and stringent cost management.


The report anticipates a revenue growth rate of 22% CAGR from FY25 to FY30, while total costs are projected to increase at a lower rate of 13% CAGR, with indirect expenses capped at 10% CAGR. A significant contributor to this growth is expected to be the high-margin lending sector, where both merchant and personal loan volumes are predicted to increase 3.6 times compared to FY24 levels.


Despite facing challenges on the consumer front, Bernstein notes that Paytm’s share of UPI transactions among merchants remains stable, significantly contributing to its payments revenue. The report identifies several key factors that could drive further growth, including the potential approval of a Payment Aggregator license, the revival of Paytm Payments Bank (PPBL), and the possible reintroduction of wallet and Buy Now Pay Later (BNPL) services.


Additionally, Bernstein describes Paytm’s merchant operations as strong, with the number of fee-paying merchants and loan volumes surpassing pre-regulatory figures. The firm credits the company's near-term profitability outlook to strict cost management, particularly through a notable reduction in indirect expenses.


While acknowledging that the consumer segment is still in recovery mode following the discontinuation of wallet and BNPL services, Bernstein expects marketing revenues to grow at a 15% CAGR, fueled by a gradual increase in Monthly Transacting Users (MTUs).


Finally, the report mentions that Paytm’s stock has surged by 103.5% over the last year, reinforcing confidence in the company's future, which is described as 'well-positioned for a strong comeback.'


--News Media


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