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Paytm share price up 5% after Yes Securities upgrades stock to ‘Buy’: What next?
Paytm share price: Yes Securities raised target price to ₹505 per share from ₹350 earlier.
Paytm share price: Paytm share price locked at 5% upper circuit in early trade today (March 18) after the stock received a ratings upgrade from Yes Securities which upgraded Paytm to ‘Buy’ from ‘Neutral’. The firm also raised target price to ₹505 per share from ₹350 earlier. Shares of One 97 Communications- Paytm's parent company- settled at ₹370.90 on Friday after hitting an upper circuit of 5 per cent. The stock has corrected about 63 per cent from its 52-week high at ₹998 as it has seen a sharp sell-off after Reserve Bank of India (RBI) barred some operations of Paytm Payments Bank (PPBL) over various compliance issues.
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What YES Securities on Paytm share price?
YES Securities said that Paytm's dependence on Wallet business has already declined materially to only about one-sixth of payments revenue as the business declined to ₹1,000 crore out of ₹6,000 crore revenue. This comes after NPCI gave its nod to Paytm to participate in UPI as a third-party application provider (TPAP) in the multi-bank model. This move will keep Paytm's UPI business intact, YES Securities said adding that client loss due to reputational damage and on-ground confusion will be well contained.
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“Loan distribution has undergone a reset but partner addition will be supportive. However, loan distribution will resume in the short-term but BNPL will remain suspended till comfort is regained from a regulatory standpoint. Structurally, growth will be driven by lending partner addition alongside same partner growth,” it said.
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Past successes underline the competitive DNA of Paytm as an organisation, it said, explaining, “Having received feedback from the regulator and undergone a de-risking process, we now believe that a less volatile future lies ahead for Paytm. We value OCL at 2.7 times FY25E P/S for an FY28-31E EPS CAGR of 78 per cent. We have not assumed any rehabilitation of OCL’s Wallet business in our assumptions. We have assumed a relatively constrained outlook for the loan distribution business. The market is currently pricing in an even more acute scenario.”
