Judges at Macquarie Research have given a double upgrade on One97 Dispatches, which runs digital payment platform Paytm, after the fintech reported operating profitability in the December quarter, three digits ahead of its earlier guidance of achieving this target by the September 2023 quarter. Macquarie has upgraded Paytm to ‘outperform’ from ‘underperform’, and has also raised the target price to Rs 800 from Rs 450, which implies a 36 percent upside from the current situation. In fact, Macquarie Capital Securities, which had kept an underperform call on the stock since its table, on Wednesday made a “double upgrade ” to fat (from light), and set target price of ₹ 800. The stock of Paytm, after rising as much as 19 per cent to ₹697.90 on the BSE in early deal, closed the day at ₹677.60, shedding some earnings.
The stock gained nearly 15 per cent over the former day’s close. Macquarie said since the table of Paytm shares at Rs 150 in mid-November 2021, the stock is down 70 per cent against a flat Nifty and that its view on the stock at Rs,150 was different from its view when the stock is now priced at around Rs 600 position. At the time of table, Macquarie said, profit and free cash inflow weren’t indeed a part of the operation discussion. Still, there has been a veritably visible change in approach of the operation to deliver profit, it said. The brokerage has raised its FY23 – 26E profit estimates by 33 – 51 per cent and its target by 80 per cent. “Since our last target price cut, Paytm has appreciatively surprised on the distribution of fiscal services profit by a wide Periphery and has also managed to control overall charges and charges,” it said. Average yearly transacting Users (MTU) for the fintech Giant continued to grow during the quarter ended December 2022, and were over 32 per cent YoY to 85 million, driven by client accessions through UPI and multiple use cases on our platform. Macquarie did, still, also point out structural challenges in the business, saying Paytm “carries significant business and reputational threat”. A many months of bad performance, the establishment said, could affect lenders withdrawing their credit lines, significantly affecting PayTM’s capability to grow.