Paytm Q1 Results Review: Motilal Oswal Stays ‘Neutral’, Revises Target Price
Paytm, India’s leading digital payments platform, has reported its Q1 FY26 results, which have been well-received by the market. The company’s net profit stood at Rs 1.2 billion, aided by lower costs related to digital lending, collections, and employee stock options.
In a research report, Motilal Oswal Financial Services has maintained its ‘Neutral’ rating on Paytm, revising its target price to Rs 1,025. The brokerage firm has valued Paytm at 21x FY27E Ebitda, which corresponds to 6.8x FY27E sales.
Key Highlights
- Net profit stood at Rs 1.2 billion in Q1 FY26, aided by lower costs.
- Gross merchandise value (GMV) increased by 6% QoQ and 27% YoY to Rs 5.4 trillion.
- Disbursement commentary was steady, while monthly transacting user witnessed a steady-state recovery.
- Paytm’s contribution margin expanded to 60.1% due to cost control.
- The company’s Rs 161 billion cash cushion offers comfort, and consistent delivery is critical for sustainable shareholder returns.
Motilal Oswal Financial Services has highlighted that Paytm is making steady progress toward profitability, driven by its strategic shift toward financial services and disciplined cost management. The brokerage firm has estimated a 35% CAGR in disbursements over FY25-28, with healthy take rates expected.
Why Paytm is a Buy
Paytm’s Q1 results have been encouraging, with the company reporting a steady quarter with in-line revenue. The company’s cost control measures have led to a healthy profit, and its disbursement commentary has been steady. The recovery in monthly transacting users and gross merchandise value has also been better than expected.
Moreover, Paytm’s Rs 161 billion cash cushion offers comfort, and the company’s consistent delivery is critical for sustainable shareholder returns. The brokerage firm has valued Paytm at 21x FY27E Ebitda, which corresponds to 6.8x FY27E sales.
Why Paytm is a Sell
Motilal Oswal Financial Services has maintained its ‘Neutral’ rating on Paytm, citing concerns over the company’s high valuation. The brokerage firm believes that Paytm’s earnings growth is likely to be slow, and the company’s revenue growth is expected to be driven by the growth of its financial services business.
The brokerage firm has estimated a 35% CAGR in disbursements over FY25-28, with healthy take rates expected. However, the company’s ability to execute its strategy and deliver consistent results is critical for its growth.
Conclusion
Paytm’s Q1 results have been encouraging, with the company reporting a steady quarter with in-line revenue. The company’s cost control measures have led to a healthy profit, and its disbursement commentary has been steady. The recovery in monthly transacting users and gross merchandise value has also been better than expected.
Motilal Oswal Financial Services has maintained its ‘Neutral’ rating on Paytm, revising its target price to Rs 1,025. The brokerage firm has valued Paytm at 21x FY27E Ebitda, which corresponds to 6.8x FY27E sales.
The company’s Rs 161 billion cash cushion offers comfort, and consistent delivery is critical for sustainable shareholder returns. Investors should continue to monitor Paytm’s progress, particularly its ability to execute its strategy and deliver consistent results.
