Paytm Shares Surge as Q1 Net Profit Jumps 79%; Analysts Offer Mixed Verdict

Paytm Shares Surge as Q1 Net Profit Jumps 79%; Analysts Offer Mixed Verdict​

Fintech giant Paytm saw its stock climb on Tuesday, reacting strongly to impressive first-quarter results. The company reported a significant profitability turnaround, with consolidated net profit jumping 79% year-on-year (YoY). This surge comes amid growing speculation regarding potential regulatory shifts and strengthening underlying business fundamentals.

Strong Q1 Results Drive Stock Rally​

Paytm's financial performance exceeded expectations across the board in the first quarter of the fiscal year. Consolidated net profit rose a massive 79% YoY to ₹220 crore, significantly up from ₹123 crore reported a year prior. Revenue from operations also demonstrated healthy growth, increasing by 28% YoY to ₹2,448 crore compared to ₹1,918 crore in the previous year.

Total income for the quarter stood at ₹2,630 crore, which is a rise of 22% from the prior year's figure of ₹2,159 crore. This improvement was mirrored in Profit Before Tax (PBT), which reached ₹247 crore, up both sequentially and on a YoY basis compared to the previous March quarter’s PBT of ₹173 crore.

Citi Boosts Target Hitting 16% Upside Potential​

Citi maintained its Buy rating on Paytm stock, raising its target price significantly from ₹1,425 to ₹1,560. This revised target implies a potential upside exceeding 15% from the current trading levels. The brokerage attributed this positive outlook to the Q1 EBITDA surpassing estimates by 16%.

Citi highlighted that lower cloud costs and increased merchant loan distribution were key contributors to the profit expansion. Furthermore, the firm raised its FY27 and FY28 EBITDA estimates by 2% and 6% respectively. Citi also pointed out that any implementation of UPI MDR could offer additional upside momentum for the company.

Goldman Sachs Notes Margin Expansion and Market Share Gains​

Goldman Sachs reiterated a Buy rating on Paytm shares, increasing its target price to ₹1,500 from the previous level of ₹1,430. This move indicates an estimated 11% potential upside opportunity for investors. The brokerage cited improving profitability alongside stronger revenue growth as primary drivers of this elevated outlook.

Goldman Sachs noted that the company’s EBITDA margin expanded notably to 8.3%, up from 5.8% recorded in the March quarter. Key growth vectors highlighted by Goldman Sachs included gains in market share across both online and offline payments channels. The firm also raised its revenue and EBITDA estimates for FY27 through FY29.

CLSA Maintains Underperform View Due to Operating Cost Concerns​

In contrast, CLSA maintained an Underperform rating on the stock with a target price of ₹1,050. This brokerage projects a potential downside of 22% from current valuations. The concern raised by CLSA centered around the expected operating expenses for Paytm Payment Services.

CLSA noted that while the company has applied for a wallet licence, they trimmed their FY27 to FY29 EBITDA estimates by 2-3%. This assessment suggests that the recent stock rally, much of which is linked to the possibility of UPI MDR implementation, may not justify significant upside even if the policy materializes.

Corporate Board Decides Against Bonus Issue​

Separate from market reactions, the parent company, One 97 Communications, informed shareholders that it will not be proceeding with a proposed maiden bonus share issue at this time. This decision was made by the directors during a board meeting held on July 20.

The company decided to postpone the move, choosing instead to prioritize business expansion and profitability. The initial proposal had been discussed following the financial results for the April-June quarter and could be revisited at a later stage by the company’s leadership.