Zaggle Prepaid shares jump 10%; Equirus Securities sees more upside potential

Shares of Zaggle Prepaid Ocean Services Ltd surged 9.99 per cent to hit a high of Rs 369.30 in Thursday's trade. Last checked, the stock was up 8.22 per cent at Rs 363.35. At this price, it has gained 67.37 per cent on a year-to-date (YTD) basis.

Equirus Securities has initiated coverage on Zaggle for the long term, suggesting a target price of Rs 445. "The company delivered a beat on its Q1 FY25 PAT with lower incentive payouts and contained operating expenses. Gross/EBITDA margins expanded 504bps/218bps YoY to 56 per cent/8.9 per cent (Q4 FY24: 59 per cent/10 per cent)," the domestic brokerage stated.

The firm expanded its partnerships service portfolio and acquired healthy clients during the quarter. "Zaggle added 100 clients/160k users in Q1 FY25 (vs. 185 clients/150k users in Q1 FY24), indicating rising acceptance among larger clients. The company has partnered with Skydo to provide international inward remittance solutions to mid-market clients. The firm also onboarded marquee clients like Wipro and PNB MetLife Insurance recently. Management indicated that the 'Zoyer' proposition is receiving good market response due to its ability to address complex issues related to vendor management (processing MSME payments within 45 days, avoiding manual errors)," Equirus mentioned.

Zaggle's management reiterated the company's growth guidance with stable margins. "Management maintained its earlier FY25E growth guidance of 45-55 per cent, with FY24 revenues set to double within two years. This growth is projected to be delivered at adj. EBITDA margins of 10 per cent. Zaggle is actively seeking EBITDA-accretive inorganic opportunities, helping it expand its product lines and/or extend geographic reach to attractive markets (such as the US)," the brokerage also said.

With that being said, Equirus underscored slowdown in new customer acquisitions, regulatory changes and increase in competitive landscape as key risks for Zaggle.

The company provides a SaaS-based spends management and analytics platform, offering business spends management (including vendor management and employee expense management), rewards and incentives management for employees and channel partners, and gift card management for merchants.