Paytm shares hit all-time low! ICICI Securities sees up to 65% upside

Shares of fintech major Paytm plunged 2 per cent to hit an all-time low of Rs 815.10. The market cap of the company slipped below Rs 55,000 crore on the BSE on Monday.

The stock is currently trading 58 per cent lower from its all-time high of Rs 1,961.05. It opened a tad lower at Rs 830 against the previous close of Rs 833.5 on the BSE. The stock is down over 38.5 per cent on a year-to-date basis.

Brokerage house ICICI Securities is bullish on the stock and has a target price of Rs 1,352 per share. It noted that Paytm calls for evaluation and assessment quite differently and distinctly, especially given the following factors -- management’s high growth aspirations calling for significant investments and cash burn, rapidly evolving business model, highly competitive landscape with low switching cost and leading players with deep pockets getting aggressive, regulatory uncertainties, and some conducive and few unfavourable outcomes.

It said that One 97 Communications’ two sided digital ecosystem of 6.4 crore average monthly transacting users (MTUs) (as at December 2021) from more than 35 crore consumer base and over 2.5 crore merchants is core to its unit economics.

"Estimating that it currently generates revenue of Rs 350-375 per MTU and Rs 1.0k-1.1k per merchant and incurs direct cost (of acquisition and transaction) of Rs 250-275 per MTU and Rs 750-775 per merchant, we derive customer lifetime value of Rs 2k per MTU and Rs 29.6 k per merchant," ICICI Securities added.

"Superimposing this on FY24E estimated MTU and merchant base and adjusting further for fixed cost, net cash and value of associates/subsidiaries, we arrive at Paytm’s intrinsic business value of Rs 94 crore (Rs 1,352 per share)," it said.

"On our target value of Rs 1,352 per share, Paytm is being valued at  around 9.5x operating revenue largely at a slight premium to global fintech with comprehensive offering, in-line with BNPL players and at a discount to the global card network entities. Also, it is to be noted that Paytm revenue is likely to grow at more than 35% CAGR over FY22-FY24E and more than 25 per cent over FY24-26E which is well above the industry average. Our valuations translate to 0.3x price/revenue growth ratio," the brokerage house said.

Recently, Paytm announced its third-quarter numbers with the net loss widening to Rs 779.80 crore, higher than the previous quarter’s loss of Rs 461.20 crore. Further, total income dipped slightly to Rs 999.30 crore in the third quarter from Rs 1,095.60 crore in the previous quarter.

Vijay Shekhar Sharma-led One 97 Communications had made a tepid debut on November 18 last year. The scrip got listed at a discount of 9.30 per cent at Rs 1,950 on the NSE against the issue price of Rs 2,150 per share.