Despite the cut in price targets, Jefferies has maintained its “buy” rating on One 97 Communications Ltd., the parent company of Paytm, but has cut its target price by 3.6% to ₹1,350 per share from ₹1,400 apiece. This still implies an upside potential of 28.6% from its previous close.
The brokerage also maintained its “buy” rating on Pine Labs Ltd. and has cut its price target by 13.3% to ₹260 per share from ₹300 apiece. Despite the cut, the revised price target implies an upside potential of 57% from current levels.
Jefferies said its interactions with the payment platforms indicate that they are targeting over 20% revenue growth and expansion in earnings before interest, tax, depreciation and amortisation (EBITDA) margins, aided by operating leverage.
They are expanding their network, growth is faster in lower origination and expanding into new areas, Jefferies said.
The stocks are down between 20%-30% this year, so far, amid new-listings and risk aversion, adding that sensitivity to lower contribution is higher, with 9% and 6% impact on adjusted EBITDA, Jefferies said.
Of the 21 analysts who have coverage on Paytm, 15 have a “buy” rating, five have a ‘hold’ rating and one has a “sell” rating. Meanwhile, two analysts each have “buy” and “hold” recommendations each on Pine Labs and one has a “sell” rating.
Shares of Paytm are trading 2.4% lower on Monday at ₹1,028.9, while those of Pine Labs are trading 2% lower at ₹161.59. Both stocks are trading well below their respective issue prices.
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