Buy This Midcap Fintech Stock, Shares Can Give 100% Returns On Investments, Says ICICI Securities

ICICI Direct in a recent report on One97 Communications Limited maintains a buy call on with a target price of Rs 1,285 per share. If the target price is taken into account and the stock is bought at the current market price, could lead to gains of up to 100% in 12 months. It has a market capitalisation of Rs 42,255.09 crore.

One97 Communications (Paytm) is a mid-cap mobile internet company which offers online bill payment services. The business provides e-commerce merchants with various online types of bill payment solutions through its mobile commerce platform and digital goods. It also owns and operates Paytm Payments Bank.

Stock Outlook & Returns On Investment

The stock last traded at Rs 643.65 per share, 1.17% down from its previous close of Rs 651.25 per share. PayTM got listed on the stock exchange on 18 November 2021. Since its date of listing, it has given 58.76% negative returns on initial investments. However, in a week, it grew by 0.16%. The stock 1 month has fallen, giving a negative return of 9.02%, whereas, in 3 months, it has fallen 22.91%. Its 52-week low is Rs 8598.55 apiece recorded on 17th June 2022, and the 52-week high is Rs 1,588.95 apiece, recorded on 17th September 2021, respectively. 
 
 

ICICI Securities' Views on One97 Communication

According to the brokerage, One 97 Communications (Paytm) continues to improve its revenue and margin profile, evident in narrowing of consolidated loss at Rs5.7bn in Q2FY23 (vs loss of Rs6.5bn in Q1FY23). The performance was characterised by 1) sustained lower processing charges and net payment margin improving a tad; 2) sharp acceleration in lending business with disbursements of Rs73bn; (3) enhanced contribution/adjusted-EBITDA (before ESOP cost) margin with higher financial services/cloud revenue growth further aided by lower indirect costs; 4) sustained growth in monthly transacting users (MTUs), deployment of offline devices and continued build-up of gross merchandise value (GMV). 
 
 What failed to cheer: 1) Contribution margin expansion capped at 84bps QoQ to 44.1% due to 34%/15% QoQ increase in promotional/other direct expenses, 2) decline in commerce revenue. Steady improvement in margin profile with better monetisation suggests achievement of operating profitability (positive EBITDA before ESOP cost) ahead of its guided timeline of Q2FY24. Maintain BUY with an unchanged target price of Rs1,285 based on customer lifetime value methodology. 
 

Disclaimer

The stock has been picked from the brokerage report of ICICI Securities. Greynium Information Technologies, the Author, and the respective Brokerage house are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before making any investment decision.