50% upside! Here's why ICICI Securities is bullish on Paytm shares

While maintaining its bullish view on One97 Communications (Paytm), brokerage ICICI Securities believes that the company shares may hit the Rs 1,055 mark, indicating an upside of over 49 per cent against the current market price of Rs 706.

In its latest report on May 26, the brokerage said the positive cycle of customer growth, retention and cross-sell playing out for the company is encouraging. Customer onboarding and an increase in use cases are helping growth.

“The new technologically-advanced platform (with 10x more transactions compared to current volume) with a focus on artificial general intelligence (AGI) could be a strong lever ahead,” ICICI Securities said.

It further added that Soundbox (launched 4G-enabled version 3.0 offering the fastest real-time payment alerts) is helping retention and cross-selling is evident from the growth in financial services revenue (up 3.5 times YoY to Rs 1,500 crore in FY23).

“The ability to grow, retain and cross-sell should give confidence to the investor in the wake of possible changes in the payment landscape. Increasing monetisation of the UPI platform and introduction of credit card in UPI could lead to positive surprises ahead,” ICICI Securities said adding they have factored in around 40 per cent CAGR in GMV between FY23-FY25E (82 per cent CAGR between FY21-FY23) and expect gross payment take rates to decline from 0.36 per cent in FY23 to 0.33 per cent in FY25E and net payment rates to decline from 0.14 per cent to 0.11 per cent during the same period.

Of late, the fintech platform reported 51 per cent YoY growth in revenue from operations at Rs 2,334 crore in Q4FY23. Meanwhile, Paytm also significantly brought down its net loss in the March quarter to Rs 168 crore from Rs 761 crore a year ago, and Rs 392 crore in Q3FY23.

Brokerage YES Securities set a target price of Rs 750 for Paytm post-Q4 results. Citi Research on May 7 also gave a ‘Buy’ rating to Paytm with a target price of Rs 1,103.

“Paytm has several growth/profitability tailwinds. Digital payments continue to see robust growth and there is significant headroom for an increase in penetration of lending products into existing consumers,” Citi Research said in a report.

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