One 97 Communications, the parent company of Paytm, saw its share price continue its upward trajectory on March 19, climbing nearly 5 percent from the previous session. Over the course of three days, the stock increased by 14 percent.
This growth was driven by an update from Yes Securities, which raised its rating on the payment company’s stock from “neutral” to “buy.” Additionally, the target price has been increased from ₹350 to ₹505.
NPCI’s recent approval for Paytm to act as a third-party application provider (TPAP) within UPI has eased pessimism around the company. This approval allows Paytm to facilitate payments, contributing to renewed investor confidence.
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Yes Securities attributed the upgrade to several factors, including Paytm’s reduced reliance on its wallet business for revenue, effectively managing customer loss despite reputational challenges, continuous addition of partners and the competitive advantage demonstrated by the company.
“Having received feedback from the regulator and undergone a de-risking process, we now believe that a less volatile future is ahead for Paytm,” the brokerage firm said in its note.
The brokerage values Paytm at 2.7 times the projected FY25E price-to-sales ratio, forecasting a compound annual growth rate (CAGR) in earnings per share (EPS) of 78% for FY28-31E.
“We did not assume any rehabilitation of OCL’s Wallet business in our assumptions. We assumed a relatively limited outlook for the loan distribution business. The market is currently pricing in an even sharper scenario,” it further added.
Analysts at Yes Securities have warned that the shutdown of Paytm’s wallet business will have an adverse impact on its earnings in the immediate future. They further noted that the current halt in loan distribution continues, which is hampering the company’s growth.
Paytm traded at ₹408.45 in the morning session, marking a 4.95 percent increase from the previous session. Over the last month, the stock has experienced a remarkable increase of 14 percent. However, year-to-date, the scrip has seen a decline of 36 percent.
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Published: 19 Mar 2024, 16:39 IST