Paytm Q3 results preview: Revenue to rise, losses to narrow on improved operational performance

One 97 Communications Ltd, the parent company of the fintech platform Paytm, will announce its results for the quarter ended on December 31, 2023 on Friday. The brokerage firms, tracking the counter, expect the company to report a mixed set of numbers in the quarterly results. Analysts expect Paytm to report a rise in revenue on both yearly and quarterly basis, while the company seems to report contraction in operational losses and net loss for the given period. Brokerages will be looking forward to key commentary by the company management with updates on loan business, merchant business and consumer payment business scale-up. YES Securities expects Paytm to report net loss of Rs 280 crore in the December 2023 quarter, with a Ebitda loss of Rs 225.4 crore. However, the brokerage expects revenue to rise 32 per cent on a year-on-year (YoY) and 8 per cent on quarter-on-quarter (QoQ) basis to Rs 2,721.4 crore in Q3FY24. "We assume 6 per cent QoQ growth in payments services to consumers, 12 per cent QoQ growth in payments services to merchants and 6 per cent QoQ growth in financial services and others and arrive at an overall growth in revenue from operations of 8.1 per cent QoQ," YES Securities said. Shares of One97 Communications (Paytm) rose more than 3 per cent to Rs 778 on Friday, commanding a total market capitalization of close to Rs 50,000 crore. The scrip had previously settled at Rs 754.65 in the previous trading session on Thursday. "We forecast payment processing charges (PPC) as a proportion of payments revenue to be at 54.5 per cent, a metric that was 54.4 per cent in 2QFY24. We arrive at a total expenses (ex PPC) growth of 6 per cent QoQ, compared with a growth of 3 per cent in 2QFY24, resulting in an EBITDA margin (other Income and after ESOP cost) of -8.3 per cent, an improvement of 89 bps QoQ," it added. Dolat Capital sees Paytm's revenue at Rs 2,786.9 crore, up 10.7 per cent Qoq and 35 per cent YoY, while Ebit loss is seen at Rs 379.7 crore, decline on both QoQ and YoY basis, with Ebit margins improving significantly. PAT is seen at Rs 255.3 crore in the December 2023 quarter, contracting on sequentially and yearly basis. It has 'buy' rating on Paytm with a target price of Rs 1,320. Paytm’s Q3 will see festive season led strong Payment’s business growth, while optimizing operational performance. Merchant device traction, updates on higher ticket-size loan distribution and new lender-partner additions would be key to watch, said Dolat Capital. "PAT loss to lower to Rs 250 crore, led by improved overall operating performance," it said. Another domestic brokerage firm Motilal Oswal expects Paytm's contribution margin to come in at 55 per cent for the quarter ended December 2023. The brokerage sees adjusted EBITDA at Rs 204 crore and contribution profit to grow 42 per cent YoY to Rs 1,490 crore. It expects decline in disbursements and GMV, with improvement in the number of subscription payment devices. Paytm's strong top-line CAGR of 54 per cent in FY21-24E has been driven by its core payment business and supported by device and loan origination monetisation. Its profitability dynamics have also improved, with its contribution margin rising to 50 per cent of revenue and positive EBITDA (ex-ESOP costs), said UBS in its initiating coverage on the stock. "We expect a moderating 21 per cent top-line CAGR in FY24- 28, while operating leverage plays out as marketing expense requirements ease and ESOP costs moderate. As a result, we forecast the company breaking even on EBITDA in FY25 and reaching a 20 per cent EBITDA margin by FY28," it added with a buy rating on the stock and a target price of Rs 900. Disclaimer: Business Today provides stock market news for informational purposes only and should not be construed as investment advice. Readers are encouraged to consult with a qualified financial advisor before making any investment decisions.

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