On Monday, Citi updated its stance on One 97 Communications Ltd (PAYTM:IN), raising the price target to INR410.00 from the previous INR360.00, while continuing to recommend a Sell rating on the stock. The revision follows the company's first-quarter results, which presented a mix of positive developments despite an adjusted EBITDA that fell short of expectations.
The report from Citi highlighted several encouraging signs in the company's quarterly performance. Notably, there was a modest month-over-month increase in monthly transacting users and a stabilization of the company's market share in the Unified Payments Interface (NASDAQ:TILE) (UPI) sector as of June 2024.
Additionally, the effects of cost-saving initiatives were evident, with reduced expenses in employee and sales fleet costs after accounting for one-time charges associated with the transition to a Third Party Application Provider (TPAP) model.
Despite these positive aspects, Citi's analyst remains cautious, opting to maintain the Sell rating while monitoring the resolution of significant challenges that PAYTM faces. These include awaiting approval from the National Payments Corporation of India (NPCI) to onboard new UPI customers and securing government Foreign Direct Investment (FDI) approval for a payment aggregator license.
In light of the recent developments, Citi has made modest downward revisions to its estimates. However, the firm has increased the valuation multiple to 30 times the projected March 2026 enterprise value to adjusted EBITDA, up from the previous 24 times.
This change reflects a belief that the company's Gross Merchandise Volume (GMV) in payments has reached a floor and that cost reduction efforts are progressing as planned.
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