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Global brokerage Macquarie has raised its target price on Paytm by 64% to 2,025 from 1,235 and upgraded the stock to Outperform from Neutral, citing strong revenue growth, improving cross sell and disciplined cost control.
Macquarie said these factors underpin a sharper margin trajectory and raised its average EBITDA margin estimates by around 6% over FY27 to FY29. In its India Financials report, the brokerage said the new target price implies an upside of 23% from Paytms market price of 1,647 as of September 25. It values Paytm at 45 times FY28 estimated earnings. A key driver of the upgrade is the merchant discount rate (MDR) notification, which Macquarie said provides Paytm a further 10 billion (about 1,000 crore) revenue opportunity with limited incremental costs, translating into high EBITDA conversion. As it now factors in revenue from select UPI transactions due to MDR, the brokerage has raised its FY28 earnings per share (EPS) estimate by 44% to 45.0 from 31.2 and estimates EPS of 55.8 for FY29. It expects substantially higher EBITDA margins, lifting its margin estimates by 600 basis points each for FY28 and FY29. Macquarie projects Paytms EPS to grow 144% in FY27 and 113% in FY28, with return on equity of 15.1% in FY28, rising to 16.0% in FY29. Macquaries estimates are also well ahead of the Street. It forecasts profit after tax of 28.7 billion (about 2,871 crore) in FY28 and 35.6 billion (about 3,562 crore) in FY29, 20.6% and 19.1% higher respectively than Visible Alpha consensus estimates. The brokerage said the sharp increase in its target price is due to the increase in EPS as well as rolling forward to FY28 based valuation. The change in earnings, including MDR revenues, adds 772 per share to its target price, while the roll forward adds a further 522. Macquaries revised estimates imply a profit after tax CAGR of around 62% over FY27 to FY29, with the brokerage naming Paytm its top pick in fintech.(ANI)
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