Paytm Q1 results preview: Will the new age digital player continue to rise?

One97 Communications, the parent company of financial platform Paytm, is scheduled to announce its results for the quarter ended on June 30, 2023. The company is likely to report a mixed bag of numbers in the first quarter of ongoing financial, the analysts expect.

Brokerage firms expect Paytm to report a flat sequential (QoQ) growth in revenue, while year-on-year (YoY) may appear strong on the face of it. The company may log EBITDA loss in the quarter, with profit after tax (PAT) widening. Gross merchandise value (GMV) and contribution margins will also be tracked widely.

Analysts tracking the stock believe that management commentary about operational performance, being EBITDA positive, target of positive free-cash flow (FCF) and scalability of credit to merchants and users, will be key watchable after the quarterly earnings.

Morgan Stanley estimates overall revenue growth of 42 per cent YoY, steady QoQ. On a sequential basis, It expects payment and financial services to grow by 43 per cent YoY. Sequentially, we expect contribution margin to improve by 4 per cent, to 55 per cent, and adjusted EBITDA margin to improve by 0.6ppt to 3 per cent. It expects an adjusted EBITDA loss of Rs 275 crore.

Axis Capital sees revenue at Rs 1,680 crore, up 38 per cent YoY but flat sequentially, while EBITDA loss is likely to come in at Rs 275 crore. The company may report a net loss of Rs 645 crore, while at Rs 168 crore in the previous quarter. Contribution margin may come in at 43.2 per cent.

"Paytm’s June 2023 operating update indicates strong growth in financial services disbursements in Q1FY24 led by both higher volumes and increase in ticket size. Payment's business reported improvement in GMV growth largely led by increase in payment volumes. We expect a steady contribution margin at 51 per cent supported by a healthy growth in financial services," it added.

Ahead of its results, shares of Paytm cracked 3 per cent to Rs 829.30 on Friday, before recovering partially. The scrip had settled at Rs 851.10 on Friday. The company's total market capitalization is hovering above Rs 53,500 crore. The stock is down more than 9 per cent from its 52-week high at Rs 915.

Dolat Capital expects Paytm's revenue to decline slightly on QoQ basis to Rs 2,295 crore, but up 37 per cent YoY. The company may report an EBIT loss of Rs 450 crore, surging over 55.7 per cent sequentially. Net loss is seen at Rs 365 crore, more than doubling compared to Q4FY23.

"Paytm’s monthly performance reported double digit GMV/MTU/Loan YoY growth in Q1, and we expect improved operational efficiency.. Decline in revenue is due to lower growth in merchant payment business. EBIT sequential decline primarily due to base effect of UPI incentive in Q4 of Rs 49 crore. PAT Loss expected due to lower OI and higher tax outgo," it added.

However, YES Securities has a different view as it sees revenue to rise 14 per cent QoQ and 59 per cent YoY to Rs 2,662 crore, while EBITDA loss is seen at Rs 207.7 crore, 61 per cent better sequentially and PAT is likely to come in at Rs 250 crore, improve 52 per cent QoQ.

"With steady loan disbursements and new device addition, we expect Paytm to post healthy sequential growth in revenue. We forecast Payment Processing Charges (PPC) as a proportion of payments revenue to be at 62 per cent, a metric that was 54.0 per cent in 4QFY23 due to UPI incentives," it added. 

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