Bernstein Assigns Rs 1,100 Target Price to Paytm, Sees 23.4% Upside Potential

Strategic Insights -

Paytm's earnings per share (EPS) growth is expected to follow a non-linear trajectory, driven by current revenue lines growing at a compound annual growth rate (CAGR) of around 20%, while indirect expenses are expected to grow at a more modest CAGR of 10%. This could lead to an EPS of INR 70 by FY30E, bringing the stock price closer to the target of Rs 1,100. Bernstein expects several near-term catalysts to drive this potential upside, including stable UPI market share and payments margin, loan disbursal growth, and improved consumer MTUs.

Key Takeaways:

  • Bernstein assigns a target price of Rs 1,100 to Paytm, signaling a significant 23.4% upside potential for the stock from its Wednesday closing price.
  • The firm maintains an "Outperform" rating on Paytm, citing non-linear EPS growth, stable UPI market share, and loan disbursal growth as key catalysts.
  • Paytm's current revenue lines are expected to grow at a 20% CAGR, while indirect expenses are expected to grow at a 10% CAGR by FY30E.
  • Direct costs for Paytm are projected to grow at a CAGR of 16% (FY25-30E), while indirect expenses are anticipated to increase at a 10% CAGR.
  • Bernstein expects loan disbursal to grow to around 3.6x FY24 volume by FY30E, driven by improved consumer engagement and platform usability.
  • The firm also highlights key risks to Paytm's future trajectory, including a possible return to high operating expenditure (opex) growth, decline in UPI payments market share, and regulatory changes.
  • Bernstein notes that the approval for Paytm's Payment Aggregator (PA) license could signal a higher probability of the company obtaining an NBFC license in the future.

Statistics:

  • 23.4% upside potential for Paytm's stock from its Wednesday closing price.
  • 20% CAGR in current revenue lines by FY30E.
  • 10% CAGR in indirect expenses by FY30E.
  • 16% CAGR in direct costs (FY25-30E).
  • 10% CAGR in indirect expenses (FY25-30E).
  • Loan disbursal growth to 3.6x FY24 volume by FY30E.

Sources:

  • Global brokerage firm Bernstein
  • The Economic Times
  • timescontent.com