Reduce One 97 Communications: target of Rs 300: Emkay

Reduce

Emkay's research report on One 97 Communications

We initiate coverage on One97 Communications (OCL-Paytm) with REDUCE and a ~13% downside. Following the recent regulatory salvo, the stock has corrected ~55% (~80% from its post-IPO peak in Nov-21), echoing the expected business/revenue dislocation in the Payments/Financial Services verticals; this was aggravated by high KMP attrition. We believe Paytm’s path to profitability will be arduous, mainly due to i) higher operational burn in Payments, given absence of the high-MDR Wallet and rising share of low MDR UPI business; ii) its jeopardized monetization strategy, with sharp slowdown in Financial Services revenue amid rising asset quality and partner attrition/business scale-down risks. Paytm is likely to see significant business disruption in FY25E;

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Outlook

Recuperation would commence thereafter, subject to no siness/regulatory hurdles ahead. It would turn EBITDA-positive not before FY28E and net profit-positive only by FY29E, in our view. Based on DCF, our TP stands at Rs300/sh, implying FY26E P/operating revenue of 1.8x, P/BV of 2.5x.

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